Weekly Energy Market Update - 22/03/2021

Last Week’s Pricing & Commentary

Contracts tumbled across the energy complex last week, despite carbon proving volatile and dragging gas and power pricing with it multiple times across the week. A mixture of a warmer weather forecast increased LNG flows, and falling carbon prices helped both gas and power lower at the start of the week, with marked weakness at the front end of the curve. Apr 21 NBP and baseload dropped 1.21p/therm and £1.27/MWh, whilst carbon rejected levels above €43/tonne as the Dec 21 EUA posted a new high of €43.36/tonne before retracting, falling back to settle €0.46/tonne below settlement on the day. The contract did eventually pull back above this high, to post a refreshed new all-time high (something that is becoming the norm lately) of €43.77/tonne. The contract was helped by an auction clearing at close to value and spec money betting on gains, however, profit-taking, and tanking oil contracts reversed price action in the afternoon to ensure the contract ended the week softly, finishing €0.88/tonne lower by Friday. Gas and power largely followed carbon price action, even with warmer weather forecasts, LNG sendout, and weak oil applying pressure at times. Contracts along the curve posted losses, Apr 21 NBP and baseload plummeted 3.40p/therm and £3.12/MWh by the end of the week. Summer 21 and Winter 21 NBP managed to post similar losses of 2.85p/therm and 2.92p/therm whereas power moved in line, shedding £2.45/MWh and £1.69/MWh on the Summer 21 and Winter 21 baseload contracts.

Oil prices suffered drastic losses last week after recent strength linked to demand recovery and generally positive fundamentals propped up prices to around $70/barrel. May 21 Brent returned to weakness as further European countries began to raise concerns with the Oxford- Astra Zeneca vaccine and reports of blood clots, causing countries to halt vaccine rollout from this provider, stemming demand recovery timelines. WHO ultimately backed the vaccine and further research showed the number of blood clots reported were in line with the usual number of blood clots reported in the general population but rising COVID cases in many European countries led to further lockdown measures likely being implemented. This further hindered demand recovery expectations, seeing the May 21 Brent contract post a loss of $4.55/barrel on the week. 

Last Week’s Average Generation Stack

This Morning’s View

The NTS was forecast to open c. 5.9mcm but this level is reducing, bringing the system closely balanced, which could provide further strength pricing which is already seeing support from low wind levels. Apr 21 NBP is up 0.70p/therm although little has traded further along the curve. Dec 21 EUAs are up €0.20/tonne after a slow start, likely spurred on by the quick jump from gas pricing. Brent continues lower with lockdown measures being implemented in certain European countries. The May 21 Brent contract has dropped $0.40/barrel below settlement. 
 

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