Weekly Energy Market Update - 21/12/2020

21 Dec 2020

Home Weekly Energy Market Update - 21/12/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jan 21

p/therm

45.97

37.22%

-2.61%

UK Gas NBP Summer 21

p/therm

37.15

-2.75%

-1.40%

UK Gas NBP Winter 21

p/therm

45.09

3.77%

-1.76%

UK Power Base Jan 21

£/MWh

57.56

29.46%

-0.45%

UK Power Base Summer 21

£/MWh

47.19

11.17%

-1.69%

UK Power Base Winter 21

£/MWh

53.36

10.64%

-1.11%

Carbon EUA Dec 21

€/tonne

31.10

26.27%

1.97%

Oil Brent Crude Jan 21

$/barrel

52.26

-15.38%

4.75%

Last week saw mixed performance from the energy complex, with the NBP and Baseload curves declining whilst carbon and oil gained on the week. The NBP curve declined on falling demand and bearish fundamental conditions including warmer temperatures above seasonal norms and higher wind outturn, averaging 13.7 GW across the week. Additionally, recent LNG arrivals have contributed to further weakness on the front month NBP contracts, further supported by greater flows from Norway despite an oversupplied grid. Front month Jan 21 NBP fell 1.23p/therm whilst the Summer 21 and Winter 21 contracts retraced by 0.53p/therm and 0.81p/therm, respectively. Weakness may continue to feed through in later dated contracts, conditions are expected to worsen in January with colder temperatures which could prompt demand higher, but high LNG arrivals could counteract this. Elsewhere, the UK Baseload curve declined due to noticeable losses recorded in the NBP curve and higher levels of wind outturn. Jan 21 Baseload fell £0.26/MWh whilst the Summer 21 and Winter 21 contracts declined £0.81/MWh and £0.60/MWh, respectively.

Renewable generation is forecast to drop this week which could provide support to front month baseload. However, demand is likely to fall during the Christmas period, potentially counteracting gains from falling renewable generation. Dec 20 EUA's gained €0.60/tonne following range bound movement across the week, prices-maintained momentum above the €30/tonne level, however recent price action has failed to successfully sustain the bullish market structure, suggesting a steeper correction lower. Feb 21 Brent gained $2.37/barrel, gains were driven predominantly by reports that congress has been made progress on the highly anticipated US fiscal stimulus bill, fuelling the prospects of oil product demand recovery. It is worth noting that the same ‘progression’ messages were sent before US presidential elections and flat lined thereafter. A firm date and further details around this stimulus package will likely provide strong bullish momentum to oil markets. 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

11.60

13.75

1.81

0.80

6.15

2.32

2.19

0.22

0.79

%

29.26

34.70

4.56

2.01

15.52

5.85

5.54

0.56

2.00

This Morning’s View

Jan 21 NBP is up 2.07p/therm as wind outturn is expected to fall to 3GW by tomorrow, coupled with slightly improved demand, though this remains largely below seasonal norms. Dec 20 EUA's have declined €0.51/tonne with prices posed to test €30/tonne if bearish momentum is sustained. Feb 21 Brent is down $2.50/barrel due to concern mounting around a new ‘mutant’ COVID-19 strain discovered in the UK which has accelerated the spread of COVID-19 at an alarming rate.
 

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