WEEKLY ENERGY MARKET REPORT - 22/08/22

Last Week’s Pricing & Commentary  

Last week saw continued high prices as there appears to be no stopping the bulls in the current climate. Prices along the curves and across the energy spectrum saw gains as risk continues to be priced into energy contracts. Weather conditions place pressure on power generation across Europe as drought lowers river levels, hurting thermal power station efficiency and hydroelectric generation export in Norway. European leaders have also place further emphasis on gas storage levels, with ever increasing targets. Summer-23 contracts continue to see strength as markets around the globe continue to struggle. UBL increased £62.42/MWh and NBP up 77.83p/therm on summer-23 contracts through the week. NBP saw gains of 38.14p/therm and 64.30p/therm for Sep-22 and Winter-22 contracts. UBL with gains of £44.11/MWh and £41.78/MWh for Sep-22 and Winter-22 contracts. Carbon was strong, EUAs and UKAs both increasing €7.23/tonne and £7.81/tonne on increased interest in thermal power generation across Europe, with numerous countries signing up coal stations for grid back up this winter. Brent contracts finished up $1.62/barrel on the week, with the market swinging on news of tight supply and poor worldwide economic data. Wind generation increased late on in the week, providing >40% of the electricity stack on Saturday afternoon.

Last Week’s Average Generation Stack

This Morning’s View

This morning has seen the market trade to new all-time highs after it reacts to news that Nord Stream 1 would go into full shutdown at the end of August. Prices seem to continue to show a risk premium built in as it was reported that when flows return it would be an increase on current rates. TTF opens 15% higher on last week’s settlement, with NBP following. Sep-22 NBP contracts trading up 80p/therm on last Fridays settlement. Power remains quiet as liquidity is still very low. The NTS is forecast 2.7mcm/d short as wind generation dropped overnight to a low of 0.26GW of generation. Brent continues to show weakness on decreasing forecasted economic demand, down $1.66/barrel.

Wider news

Boris Johnson 'approves funding for Sizewell C nuclear plant'

Shell cuts output at German refinery as Rhine is drying up

Plans to cut energy bills if peak-time use avoided

China drought causes Yangtze river to dry up, sparking shortage of hydropower

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