Weekly Energy Market Update: 18.01.2021

18 Jan 2021

Home Weekly Energy Market Update: 18.01.2021

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 21

Change on Week

UK Gas NBP Feb 21

p/therm

59.35

5.04%

-6.92%

UK Gas NBP Summer 21

p/therm

41.46

-4.69%

-5.90%

UK Gas NBP Winter 21

p/therm

49.71

-3.19%

-4.40%

UK Power Base Feb 21

£/MWh

70.64

4.17%

0.24%

UK Power Base Summer 21

£/MWh

50.53

-3.70%

-4.95%

UK Power Base Winter 21

£/MWh

56.65

-2.16%

-3.53%

Carbon EUA Dec 21

€/tonne

31.74

-2.94%

-9.73%

Oil Brent Crude Mar 21

$/barrel

55.10

6.99%

-2.03%


The energy complex dropped lower over the course of last week on the face of it, but this fails to explain the roller coaster of price action and volatility truly seen. NBP and power prices rallied through to Tuesday with front-month contracts reaching eye-watering highs of c. 83.50p/therm and £105/MWh. The NBP contract gained 10p/therm on the day due to starkly colder than seasonal norm temperatures coupled with continued low LNG arrivals into the UK. Low wind generation on the day further compounded bullish momentum. Power prices tracked gas prices, not being held back by subdued carbon in comparison, with a gain of £10.64/MWh on the Feb baseload contract. However, following this, both commodities spent the remainder of the week dropping lower and successfully erasing the astonishing gains from the start of the week. Contracts were helped by the imminent threat of colder weather dissipating, the expectation of a milder weekend in the UK, and forecasts of warmer weather in Asia that could help lower premiums and more LNG arriving at UK shores. This correction saw Feb 21 NBP end the week 4.41p/therm lower and Feb 21 baseload sit almost exactly where it began the week.

With gas and power prices taking the limelight last week oil and carbon were much less spoken about despite oil reaching highs not seen for c. 11 months. Mar 21 Brent traded up to highs of $57.42/barrel in the middle of the week before failing to sustain this level with rising COVID-19 cases, new variants, and increased air travel restrictions dampening the demand recovery outlook. The contract eventually settled the week $1.14/barrel lower. Carbon spent most of the week falling lower, despite prices momentarily pushing to a high of the week on the Tuesday amid extreme bullishness in gas and power. With prices failing to take direction from strong gas and power early in the week, the sell-off from both commodities later in the week seemed to manage to drag carbon lower. Dec 21 EUA's dropped by €1.75/tonne on Thursday, solidifying losses on the week, as the contract closed Friday €3.42/tonne lower. 
 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

18.03

8.73

0.94

0.66

5.92

2.73

1.88

0.33

2.44

%

43.26

20.96

2.26

1.58

14.21

6.56

4.51

0.79

5.87

This Morning’s View

Following a weekend of slightly milder weather and stronger wind generation, prices have continued to tumble. Feb 21 NBP began the day dipping as low as 4.35p/therm below settlement although the contract has since risen slightly, now sitting 3.68p/therm below settlement. Length in the system and stronger wind could see losses cemented. Weakness in oil was short-lived this morning with Mar 21 Brent gaining to sit flat to settlement. Carbon hovered around settlement early on but has now risen to €0.35/tonne above settlement on the Dec 21 contract. 
 

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