Weekly Energy Market Update - 22/06/2020

22 Jun 2020

Home Weekly Energy Market Update - 22/06/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Jul 20

p/therm

14.42

-49.05%

5.64%

UK Gas NBP Winter 20

p/therm

32.84

-24.42%

7.67%

UK Gas NBP Summer 21

p/therm

30.50

-20.16%

6.64%

UK Power Base Jul 20

£/MWh

29.94

-20.69%

7.43%

UK Power Base Winter 20

£/MWh

44.33

-8.09%

5.12%

UK Power Base Summer 21

£/MWh

39.71

-6.45%

5.30%

Carbon EUA Dec 20

€/tonne

24.16

-1.91%

11.13%

Oil Brent Crude Aug 20

$/barrel

42.19

-33.33%

8.74%

Last week saw the energy complex push higher, helped by the slowdown of LNG deliveries, lower renewable generation and OPEC+ laggards pledging to better comply with oil production cuts, although an extension to these cuts is yet to be confirmed. Near curve contracts were supported for the week by renewable output struggling to reach above 30% on average, forcing CCGT to carry the fuel mix, providing close to 50% on average for the week. Jul 20 NBP and baseload rose 0.77p/therm and £2.07/MWh on the week as a result whilst some of the high street opening at the start of the week amongst further lockdown measures easing would have boosted positive sentiments and caused an uptick in demand. Further dated contracts were similarly lifted with Summer 21 pushing 1.90p/therm and £2.00/MWh higher over the course of the week, finding encouragement from resurgent carbon and oil.

Oil rose back above the $40 mark as Aug 20 posted a gain of $3.39/barrel on the week, despite rising cases of coronavirus in the US and returning cases in China. Optimism that oil production cuts could be extended to August and countries, such as Iraq and Kazakhstan, agreeing to better comply with the OPEC+ production cuts of 9.7 million barrels per day. However, many remain concerned by the possibility of a second wave as WHO reported a record jump in confirmed cases globally at the end of the week, particularly in North and South America. Carbon posted a gain of over 10% last week, remaining comfortably above the €20 mark, as the Dec 20 EUA contract jumped by €2.42/tonne. There is a general feeling that prices may have bottomed out as sub 10p/therm gas prices, sub $20/barrel oil prices and sub €20/tonne carbon prices all seem a distant memory however it’s worth highlighting the weakness in pricing when comparing to the start of the year and the shattering effect a second wave could have. 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

13.89

4.04

5.16

0.13

4.84

1.17

2.02

0.00

0.09

%

44.31

12.90

16.45

0.42

15.45

3.72

6.46

0.01

0.29

This Morning’s View

This morning has seen strong wind generation early on, contributing to the generation stack in line with CCGT, whilst solar output is expected to pick up and remain high for much of this week as temperatures are set to go above 30°C for some areas of the UK. Wind and solar are already providing c. 36% of the generation stack and with solar set to pick up further, we could see mounting pressure on the prompt due to an already long NTS. A relatively muted opening this morning with most of the price action occurring within near-term contracts. Jul 20 NBP has swung between 0.1 and 0.3 p/therm so far this morning as the front end of the gas curve shifts lower. Further dated contracts have not traded materially and will be struggling to take direction from mostly flat carbon and oil prices.  Rising cases of coronavirus globally are causing nervousness among markets as demand worries outweigh tighter supply. Aug 20 Brent and Dec 20 EUAs are $0.14/barrel and €0.15/tonne above settlement at time of writing. Prices could see some news driven movement as the UK looks set to announce their decision on certain social distancing guidelines which could help further business’ open, thus lifting demand. 
 

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