Weekly Energy Market Update - 20/09/2021

20 Sep 2021

Home Weekly Energy Market Update - 20/09/2021

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 21

Change on Week

UK Gas NBP Oct 21

p/therm

162.80

255.77%

11.87%

UK Gas NBP Winter 21

p/therm

165.85

222.98%

11.51%

UK Gas NBP Summer 22

p/therm

83.00

109.06%

3.20%

UK Power Base Oct 21

£/MWh

163.59

198.96%

19.91%

UK Power Base Winter 21

£/MWh

162.45

180.58%

15.83%

UK Power Base Summer 22

£/MWh

89.30

88.59%

2.95%

Carbon EUA Dec 21

€/tonne

59.48

81.78%

-2.36%

Carbon UKA Dec 21

£/tonne

55.16

21.90%

3.68%

Oil Brent Crude Nov 21

$/barrel

75.34

48.89%

3.32%

Last week saw gas markets remain at centre stage of the energy complex. Front-month rallied hard into the start of the week, gaining close to 19.50p/therm by Tuesday’s close. Bullishness continued into Wednesday morning where the contract reached a high of 194.94p/therm before momentum turned around and sellers came to the fore. Over the rest of the day, the contract dropped almost 32p/therm to trade below the prior day’s settlement, a bearish indicator for the next day. This bearish momentum looked strained early on Thursday as the contract was pushed higher but ultimately came to fruition with the contract being smashed lower into the settlement to cement a within-day loss. Friday again started strong before selling off over the course of the afternoon, however rather than weakness into the close we saw buying. This buying was likely a mixture of shorts being closed and buyers getting into the dip with more mainstream media picking up stories of struggling energy firms and record-high wholesale pricing. Front-month gained 17.28p/therm on the week, but more impressive still was the trading range of 46.66p/therm. Winter 21 gained 17.11p/therm on the week whilst bullishness was tempered further down the curve with Summer 22 gaining just 2.57p/therm. Power markets were extremely bullish too, tracking gas and strength in short-term power. Front-month, Winter 21, and Summer 22 UK base gained £27.16/MWh, £22.20/MWh, and £2.55/MWh.

Prompt power continued to be strong with last week’s day-ahead auctions outturn above £265/MWh baseload. We also saw another four-figure system imbalance price, not helped by fire at an IFA interconnector substation that has knocked 1GW of the line’s capacity off until the end of March 22. Carbon markets continued to show dissociation to gas pricing. Dec 21 EUAs ultimately dropped €1.44/tonne on the week and is starting to stray into bearish territory given its inability to break out of the recent range despite gas market behaviour. UKAs moved in the opposite direction to their EU counterparts with the Dec 21 contract gaining £1.96/tonne and helping to narrow the EUA/UKA spread. Brent markets gained on the week as US supply, struggling to return after Hurricane Ida, was hit further by Storm Nicholas, threatening to curb Texan production. Gains were tempered however by the Chinese looking to sell out some of their Strategic Reserves and the Nov 21 contract rose $2.42/barrel.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

15.62

3.07

3.32

0.14

4.84

3.68

1.74

0.28

0.79

%

46.65

9.18

9.93

0.43

14.44

10.98

5.18

0.85

2.36

This Morning’s View

Some in the market were calling the gas bull run over on technical patterns with the contract posting a shooting star reversal pattern last week, although we felt this was a little premature given the fundamental picture. This morning has certainly tested that theory with Oct 21 NBP up 15.24p/therm, following TTF higher. The NTS is forecast just 0.90mcm long despite demand close to 32mcm seasonal norms. Dec 21 EUAs continue to oppose gas, down €0.66/tonne, whilst Nov 21 Brent is down $0.79/barrel on strength in the US dollar and rising rig count.
 

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