Weekly Energy Market Update - 20/04/2020

Last Week’s Pricing & Commentary

Last week saw losses over the first half of the week erased by EDF announcing a trimming of their 2020 nuclear power output target, causing bullish carbon and continental power to push the curves higher over the latter half of the week. Prompt gas markets were still weak with front month losing 1.14 p/therm on the week, as bearish fundamentals comprised of Covid-19 demand destruction and relatively bountiful supply amidst multiple LNG deliveries and extremely healthy continental gas storage levels. Winter 20 and Summer 20 gas posted gains of 0.54 p/therm and 0.24 p/therm on the week, bolstered by consecutive near 1 p/therm gains during Thursday’s and Friday’s trading.

UK power contracts followed a similar pattern, trading down with gas over the first half of the week before strong moves upwards on Thursday and Friday allowed the front month, Winter 20 and Summer 20 baseload to post gains of £0.59/MWh, £0.52/MWh, £0.21/MWh on the week. As discussed earlier, supporting both commodity curves late in the week was bullish carbon. Dec 20 EUAs began the week pointing downwards as equity markets and Brent weakened, however the EDF news on Wednesday prompted the contract to post a within day gain of almost €1.80/tonne and settle just below €21/tonne despite just the day before touching lows of €18.86/tonne.

With EDF announcing possibilities of increased outages over the Summer and Autumn, the expectation is that thermal generators will have to fill the gap, increasing carbon and fuel demand. Whilst, with spark spreads opening allowing generators to lock in some profit down the curve, it remains to be seen how much electricity demand will remain given coronavirus-effects, which could see prices relax as the market prices this in. Brent Crude markets continued to suffer reduced demand for crude and refined products and near-full storage levels. Jun 20 Brent posted a loss of almost $6/barrel on the week with the start of the week being particularly bearish given the historic OPEC+ supply cuts having little supportive effect and record builds in US inventory gains.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen the front of the NBP curve give back some of last week’s late gains with front month currently down 0.77 p/therm, although little has traded further down the curve yet. Prompt markets may see some relief from an NTS forecasted 23mcm long as several deliveries to Milford Haven over the weekend sees their output at around 76 mcm while warmer temperatures and strong renewable output have brought demand to 35 mcm below seasonal norms. Dec 20 EUAs opened weak but have pushed back to just €0.18/tonne below settlement, a €0.27/tonne gain since the open. Should the contract continue its climb, we could see some support lent to UK gas and power futures, especially past the front-end. Brent markets continue to weaken with the Jun 20 contract down $1.04/barrel as US oil prices drop to lows not seen since 1999.

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