Weekly Energy Market Update - 21/06/2021

Last Week’s Pricing & Commentary

Last week saw gas and power prices lifted along the curve as attention to storage injections re-ignited with temperatures across the UK dropping off, halting the injections we had seen whilst temperatures were often in the mid-20°Cs. Prices initially shifted higher on Monday, finding support from seemingly ever-present low storage coupled with Asian bid for LNG pushing the marginal price higher. Jul 21 NBP rose 2.63p/therm settlement to settlement as a result. Following this, weakness in carbon filtered through to gas and power, steering contracts lower. Jul 21 NBP and baseload contracts lost 1.36p/therm and £1.76/MWh on Tuesday, respectively. The story continued on Wednesday, with moves tracking carbon which saw a late sell-off in Dec 21 EUA’s push the rest of the complex lower. Sentiment changed come Thursday however as gas and power, to a lesser extent, took less direction from carbon which posted a €0.19/tonne within day loss. Gas marched higher, managing gains along the curve, albeit slight ones. Power managed to keep its head above water at the front of the curve but weakness in Dec 21 EUA’s was able to pull the Winter 21 and Summer 22 contract lower, with losses of £0.20/MWh and £0.06/MWh achieved, respectively.

Friday morning started quietly with prices drifting lower in what looked set to be a quiet day after a volatile week. This did not last though and over the course of the afternoon, gas started to trade higher only to rally further still after the market had settled. Forecasts of low wind generation and continued tightening of LNG send-out coupled with an unplanned outage at the Karsto processing plant, which is expected to last until tomorrow, spooked the shorts and sent them running for cover.  Jul 21 NBP settled 4.23p/therm higher with this level easing off through to Summer 22. Power followed suit gaining £2.91/MWh on the Jul 21 baseload contract and gains dissipating further along the curve. EUA’s and UKA’s bucked the complex trend, ending the week down by €0.77/tonne and £1.70/tonne on the Dec 21 contracts. 

Last Week’s Average Generation Stack

This Morning’s View

Despite weakness in carbon, gas pricing has shot higher this morning, front-month gas gapped higher at the open and has swung around quite a bit already, currently sitting 1.78p/therm above settlement. Gains along the curve peak at Sep 21 NBP, highlighting tightness in the remainder of Summer 21 contracts. A short system and gas output only just getting back to c. 6GW this morning will also be contributing to the continuation of strength from Friday’s rally this morning. Carbon opened weakly this morning, slightly below Friday’s settlement before easing off further. The Dec 21 EUA contract has begun to be lifted by bullish gas, lifting above settlement to sit just €0.22/tonne up. Oil has reacted similarly this morning, beginning the day below settlement with worries around Iran flooding the market with supply if a nuclear programme agreement can be reached with the U.S. The Aug 21 contract has now begun to lift higher though, currently sitting $0.21/barrel above settlement. 

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