Weekly Energy Market Update - 18/05/2020

18 May 2020

Home Weekly Energy Market Update - 18/05/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jun 20

p/therm

12.59

-54.35%

-6.95%

UK Gas NBP Winter 20

p/therm

32.48

-25.25%

-0.06%

UK Gas NBP Summer 21

p/therm

29.95

-21.61%

1.68%

UK Power Base Jun 20

£/MWh

25.30

-32.61%

-1.63%

UK Power Base Winter 20

£/MWh

41.53

-13.89%

0.29%

UK Power Base Summer 21

£/MWh

36.72

-13.50%

1.02%

Carbon EUA Dec 20

€/tonne

19.17

-22.17%

-1.69%

Oil Brent Crude Jul 20

$/barrel

32.50

-49.08%

5.86%

Last week saw the spreads between near curve and back end contracts open further in UK gas and power markets. Front month NBP and UK baseload contracts were sold on the week losing 0.94p/therm and £0.42/MWh respectively as losses in the first half of the week proved too great to recover. Much of the front month movement could be attributed to the prompt with stronger renewable output and length in the NTS pressuring prices through the first half of the week whilst stronger pricing over the latter half of the week was supported by falling wind output as well as strong export and gas-for-power demand. Further down the curve contracts were stronger on the week with Winter 20 remaining flat and Summer 21 NBP gaining 0.50p/therm, steepening the contango. UK seasonal baseload contracts were stronger too as Winter 20 and Summer 21 gained £0.12/MWh and £0.37/MWh. EUAs followed a similar pattern being largely sold over the beginning of the week, falling through €19/tonne several times over Monday’s and Tuesday’s trading settling at €18.52/tonne on Tuesday. However, the rest of the week was spent rallying to close back above €19/tonne on Friday, following rallying oil markets and cautious optimism around European lockdown measures easing. So, despite a €0.33/tonne loss on the week, Dec 20 EUAs ended the week on a somewhat bullish run and could look to continue into this week.

Brent Crude markets again were weak at the beginning of the week as traders shrugged off commitments from Saudi Arabia to deepen supply cuts as rebounding coronavirus infection rates were seen in nations that had eased lockdown measures. However, by mid-week market sentiment largely shifted, helped by the EIA report revealing a 745,000 barrel drop in US crude inventories, signs of recovering demand with refinery runs in China increasing, falling US production with oil and gas rig counts down to lows, and analysts expecting US storage issues to ease before June WTI delivery. However, with prices still c. 50% lower than the beginning of the year, traders look wary of the macroeconomic and demand effects of the coronavirus as well as a resurgence in infection rates.


Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

6.49

7.26

6.46

0.17

5.66

2.62

2.11

0.00

0.00

%

21.10

23.60

21.00

0.54

18.38

8.51

6.84

0.01

0.00

This Morning’s View

This morning has seen gas markets open weak before getting lifted above settlement on the back of stronger EUA and Brent markets. Front month NBP is sitting 0.20p/therm above settlement despite length in the NTS and lower power station demand as wind output is sitting at 6GW and expected to grow to c. 10GW by midday. Dec 20 EUAs opened €0.26/tonne above settlement and went on to trade through €19.50, however quickly gave back these gains and the contracts is currently sitting flat to the open. Brent markets have pushed higher this morning currently sitting $1.18/barrel above settlement with analysts pinning the gains on easing lockdown restrictions causing expectations of increased demand as the market is simultaneously reducing supply.

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