Weekly Energy Market Update - 18/11/2019

18 Nov 2019

Home Weekly Energy Market Update - 18/11/2019



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Dec 19





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Dec 19





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Jan 20





Last week saw UK gas pricing fall in the early part of the week and consolidate in the latter. Dec-19 gas lost 1.91 p/therm from Monday’s open to Wednesday’s settlement as oversupply on the NTS during some of the lowest temperatures of Winter so far fuelled bearish sentiment. However, later in the week pricing firmed and the contract posted a gain of 0.71 p/therm from Thursday’s open to Friday’s settlement. This late strength could be related to the prompt pushing higher as well as strength in oil. A similar pattern was seen in the near-curve seasonal contracts with losses in the early part of the week, however strength later in the week was enough for the Summer-20 and Winter-20 contracts to post respective gains of 0.20 p/therm and 0.09 p/therm. Some in the market were speculating that this may be a sign of the near-curve contracts beginning to bottom out with forecast temperatures below norms in the upcoming week as well as the convergence between prompt and front month pricing. On the other hand, bearish indicators come from the NTS remaining relatively comfortable last week despite days of demand over 310 mcm and wind output lows of 3 GW, as well as the number of LNG vessels expected on UK shores by the end of the month and high storage levels.

UK Power followed gas last week however weakness in carbon weighed on the curve capping gains later in the week. The front month, Summer-20 and Winter-20 baseload contracts posted respective losses on the week of £0.83/MWh, £0.08/MWh and £0.35/MWh. The prompt was heavily influenced by wind output as periods of low output supported pricing. For example, on Friday day-ahead pricing increased almost £8/MWh from the day before on low output over the weekend. EUAs had a torrid week posting a loss of just over €1/tonne and reaching new 1M lows. Heavy losses were felt on Tuesday afternoon when the German government released their plan to shift hard coal out of the stack without clearly addressing plans to cancel EUAs in line with this removal of a key demand sink. This left the market worried that the market would tend to oversupply, causing the Dec-19 contract to lose €0.95/tonne on Tuesday alone.

Oil also had an interesting second half of the week despite failing to breakout of the recent trading range to either the upside or downside. Wednesday saw the Jan-20 contract gain $0.52/barrel over the day as news broke that the API were expecting US stockpiles to fall. However, when the EIA report detailed that stockpiles actually rose, even more than forecasted, the market retraced some of these gains to sit just above the $62/barrel mark. Friday saw the Jan-20 contract trade down in the morning in line with Thursday’s weakness before positive comments around finalising a preliminary US-China trade deal from a senior US official, Wilbur Ross, pushed the contract up $1.60/barrel from the lows.

This Morning’s View
This morning has seen UK gas pricing weaken. Front month gas is 1.13 p/therm below settlement while Summer-20 and Winter-20 have traded down 0.65 p/therm and 0.34 p/therm respectively. This is despite demand at 318 mcm, 27 mcm above seasonal norms, and an undersupplied NTS. Demand is expected to tail off as the week continues and temperatures rise, a bearish indicator for the prompt and near-curve gas and power contracts. Carbon pricing has also been dragged lower with Dec-19 EUAs currently trading €0.46/tonne below settlement, posting new 1M lows. Power pricing could be pressured on the open with early morning losses in gas and carbon. Brent crude is relatively flat to settlement.

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