Weekly Energy Market Update - 20/07/2020

20 Jul 2020

Home Weekly Energy Market Update - 20/07/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Aug 20

p/therm

13.42

-54.21%

-0.74%

UK Gas NBP Winter 20

p/therm

33.35

-23.25%

-3.47%

UK Gas NBP Summer 21

p/therm

31.07

-18.66%

-2.14%

UK Power Base Aug 20

£/MWh

30.60

-19.66%

-2.92%

UK Power Base Winter 20

£/MWh

45.93

-4.77%

-1.50%

UK Power Base Summer 21

£/MWh

41.21

-2.92%

-1.60%

Carbon EUA Dec 20

€/tonne

27.82

12.95%

-4.40%

Oil Brent Crude Sep 20

$/barrel

43.14

-31.25%

0.05%

The energy complex dipped lower last week, largely led by carbon falling from the highs and still bearish fundamentals. Near-term gas and power contracts experienced more volatility on the week, often showing sharp moves either way caused by short term fundamentals. Warmer weather forecast towards the end of last week, LNG due through to the end of July, occasional strong renewable output and general length in the NTS helped near-term pricing lower whilst intermittent renewable output causing higher gas burn generation and demand commonly above seasonal norms helped create some days of gains and mute losses on the week overall. Aug 20 NBP and baseload posted losses of 0.10p/therm and £0.92/MWh. Losses were more pronounced further down the gas curve, with the commodity taking much direction from carbon. Winter 20 and Summer 21 NBP dropped 1.20p/therm and 0.68p/therm on the week as the winter contract still only trades at a slight premium to the summer contract.

Similarly, power moved in the same direction as gas as Winter 20 and Summer 21 baseload fell £0.70/MWh and £0.67/MWh on the week. Carbon was the main talking point and driving force for the week once again with the Dec 20 contract plummeting €1.28/tonne despite strength early in the week as the contract jumped above the €30 level on Monday and Wednesday. This was boosted by commentary from Germany’s environmental minister outlining that buyers may be pushing EU carbon prices higher at such a pace due to an expectancy that the 27-nation bloc will deliver a higher climate target for 2030. The contract went on to post positive upwards movements on Friday too, clawing its way comfortably back above €27/tonne, with some in the market eyeing the €30 mark once again. This came off the back of a stronger auction after auctions earlier in the week were relatively underwhelming. Oil finished the week flat to settlement, with the latter half of the week spent retracing gains as OPEC+ confirmed an easing of production cuts as fuel demand seems to be on the rise. Many in the market remain wary of easing record production cuts too early as several countries continue to show rises in coronavirus cases with increased lockdown measures taking place in some cases too. Sep 20 Brent eventually settled $0.02/barrel higher on the week. 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

12.60

5.55

4.92

0.29

5.13

1.28

2.93

0.02

0.00

%

38.53

16.96

15.03

0.87

15.70

3.90

8.95

0.06

0.00

This Morning’s View

Lower renewable generation today could put some pressure on the prompt although warmer weather forecast along with a balanced NTS could mute this. Most contracts have opened lower this morning with the front end of the gas curve quickly pushing lower as Aug and Winter 20 NBP are off 0.51p/therm and 0.50p/therm at time of writing. Dec 20 EUAs have quickly sold off below the €27 level, currently €0.76 below settlement. Sep 20 Brent has dipped below $43, dropping off $0.16/barrel from settlement and pointing lower still. Fuel demand worries rumble on as certain countries struggle to control virus cases. 
 

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