Weekly Energy Market Update: 15.02.2021

Last Week’s Pricing & Commentary

Last week saw gas markets soften particularly at the front of the curve as weather models found some common understanding that cold weather was due to come to a halt at the end of the week. This saw cold weather premiums stripped out of contracts by mid-week, especially at the front of the curve for the last month of Winter 20 with Mar 21 dropping close to 7p/therm. Also pressuring pricing was the backdrop of increased LNG supply and strong renewable output late in the week. Seasonal gas also posted losses, but less significantly with Summer 21 and Winter 21 dropping 2.50p/therm and 2.10p/therm. With storage levels depleted after the cold spell, and withdrawals looking set to continue due to the prompt premium to front month, storage injection could see Summer 21 pricing relatively supported. Power markets moved in line with gas with the strongest losses at the front of the curve whilst bullish carbon helped late gains in seasonal contracts to limit losses. Mar 21 baseload dropped just over £2/MWh whilst Summer 21 and Winter 21 traded down £0.18/MWh and £0.05/MWh.

Prompt power markets remained relatively tight with the highest print in the imbalance market of the week at £725/MWh on Wednesday amidst a tight system before a wave of wind output came in later in the week. Carbon markets continued to wow spectators with dips continuing to remain bought, several new highs, and a near €3/tonne trading range. Early in the week, the contract tested €40/tonne and upon failing to reach the level, sold off. However, as we suggested then, fund money on the bid and the will of the market to get the Dec 21 EUAs to €40/tonne could see pricing supported. Later in the week the contract pushed above €40/tonne before news broke that the EU were considering capping speculative trading in the EU ETS, which caused the contract to tumble to settle €1.36/tonne from the highs. However, on Friday, traders ultimately shunned the news and pushed the contract back above €40 where it managed to settle at €40.02/tonne. Brent markets continued to push higher with five days of gains, pushing the Apr 21 contract to settle some $3/barrel up on the week. The supportive backdrop of high hopes around US stimulus plans, a tightening market, and vaccine rollouts played its part.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen gas markets continue to slip with Mar 21 NBP down 2.35p/therm as warmer temperatures materialise and the relatively comfortable fundamental picture takes centre stage. NTS demand is forecast some 13 mcm below seasonal norms and helping to keep NTS in forecast length. Elsewhere, EUAs pushed into new highs of €40.64/tonne in early trading but currently sit €0.07/tonne below settlement, testing €40/tonne as a support level. Brent market punched higher in early trade as tensions rise in the Middle East with Apr 21 up $0.71/barrel.
 

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