Weekly Energy Market Update - 21/09/2020

21 Sep 2020

Home Weekly Energy Market Update - 21/09/2020

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Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Oct 20

p/therm

30.36

-9.37%

9.01%

UK Gas NBP Winter 20

p/therm

38.37

-11.69%

2.32%

UK Gas NBP Summer 21

p/therm

33.97

-11.07%

2.23%

UK Power Base Oct 20

£/MWh

43.03

-3.22%

2.35%

UK Power Base Winter 20

£/MWh

51.06

5.87%

1.90%

UK Power Base Summer 21

£/MWh

43.94

3.51%

1.78%

Carbon EUA Dec 20

€/tonne

27.99

13.64%

-1.44%

Oil Brent Crude Nov 20

$/barrel

43.15

-30.13%

8.47%

Last week saw gas and power futures recover, following a prior week of noticeable front-end weakness. Front-month NBP contracts were up 2.51 p/therm, supported by a speech from European Commission President Von der Leyen’s speech last week, announcing a change in the EU 2030 climate change goals, from 40% to 55%. The prospects of greater natural gas demand could have rolled over to the UK NBP contracts and contributed towards front month futures rising on the week. Seasonal contracts also took the cue from front month gains in NBP and rose slightly on the week by 0.87 p/therm whilst Summer 21 rose by 0.74 p/therm though likely held back by weaker carbon prices.

Power markets followed behind gas markets, with front month contracts posting a gain of £0.99/MWh, whilst the seasonal price action posted similar gains illustrated by a £0.95/MWh gain on the winter contract followed by a £0.77/MWh gain on the Summer 21 power contracts. Carbon contracts slipped by €0.41/tonne, after initially gaining following Von der Leyen’s speech. An overly ambitious European Commission may have left market participants somewhat doubtful and therefore likely to seek a clear action plan on how decarbonisation targets will be achieved. Brent markets gained on the week, posting a gain of $3.37/bbl likely due to the impact of Hurricane Sally which disrupted refinery production activity in the Gulf of Mexico, U.S. stockpiles shrunk as a result prompting oil prices higher. Over a quarter of U.S. offshore output has been temporarily forced offline due to the hurricane.

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

13.80

4.62

6.31

0.35

4.78

2.06

1.90

0.01

0.57

%

40.11

13.43

18.36

1.02

13.88

5.98

5.51

0.04

1.66

This Morning’s View

This morning has seen gas NBP futures jumping with the front month contract up 0.64 p/therm, Dec 20 EUAs down €1.07/tonne and Brent Nov 20 futures down $0.88/bbl on the day. Gains at the front of the gas curve could be limited by a long NTS and demand below seasonal norms. Power contracts could firm as wind power generation picks up and gas displays some strength early on this morning. UK nuclear generation also fell following an unplanned outage currently taking place at the 630 MW Sizewell B-1 facility. An increasingly worrying Covid-19 outlook in the UK could be weighing on gas and power contracts as demand begins to be questioned. The UK saw 3,899 new cases of Covid-19 added yesterday with 18 deaths, following a record high 4,422 cases recorded on Saturday. The PM, Boris Johnson is expected to initiate restrictions, whilst the Bank of England’s Gov Bailey will be speaking on Tuesday following indications that negative rates are being considered by the central bank, potentially prompting demand worries as the outlook of the UK economy is questioned. Elsewhere, although oil prices have ticked higher this morning, Hurricane Sally is not expected to last long thus there is a risk stockpiles begin to rise with refineries re-opening. Moreover, the rise on oil prices was due to a reduction in supply, demand remains stagnant.
 

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