WEEKLY MARKET UPDATE - 23/08/2021

Last Week’s Pricing & Commentary

Last week saw vast volatility in the European energy complex, led mostly by gas hub pricing. Front month NBP marched up higher on Monday reaching the week’s high of 119.34p/therm and settling an impressive 8.17p/them higher.

Support came from a change in sentiment around Russian gas with the market moving from asking the question of ‘when’ Russia would flow to Europe, to ‘if’ they could flow gas based on a tight Russian domestic balance and the outages.

However, Wednesday and Thursday provided the most impressive price moves as Wednesday saw Gascade, the North Germany TSO, post nominations on their website for the Lubmin II hub, which is the receiving station for Nord Stream 2. This shocked the market and saw a huge sell off as traders were stopped out of long positions with a low of 103.05p/therm being printed, however these nominations were later confirmed to be an IT error rather than Nord Stream 2 going through testing and the market pared losses to settle 5p/therm lower.

Thursday then brought further Nord Stream 2 drama as Gazprom made the statement that they expect the pipeline to deliver 5.2 bcm of gas to Europe over the balance of 2021. Some analysis places the start of gas flow to be mid-October, whilst others suggest it could be earlier if Gazprom do not wait for both pipelines to be finished. Friday saw profit taking push pricing higher during low liquidity to limit losses on the week.

Power markets tracked gas with front month, Winter 21 and Summer 22 UK baseload dropping £4.36/MWh, £4.16/MWh, and £2.11/MWh. Carbon markets were also led by gas with strong gains on Monday and the Nord Stream 2 saga causing heavy losses on Wednesday and Thursday. Thursday’s sell off cut just over €3.60/tonne of value from the Dec 21 EUA contract as gas markets plummeted.

However, gains on Monday and Friday meant that the contract only dropped €1/tonne on the week. UKAs mirrored EUAs, dropping just £0.55/tonne on the week. Brent crude markets were also weaker over the course of last week as US gasoline stocks rose, a surprise to the market in what should be a period of intense demand in the US in the form of driving season. Also weighing on pricing was growing delta variant cases in Asia, specifically China, which had traders concerned with demand recovery trajectories.

Last Week’s Average Generation Stack

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