Weekly Energy Market Update - 23/11/2020

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Last Week’s Pricing & Commentary

Last week ended mixed with a slight bullish tone across the energy complex. The energy complex was mostly bullish at the start of the week amid news of the Pfizer vaccine which is said to be 90% effective in preventing COVID-19 infections , however these gains begun to fade towards the end of the week. The NBP curve posted gains despite higher wind outturn on average and week ahead warmer temperature forecasts. Dec 20 NBP gained 0.52p/therm whilst the Summer 21 and Winter 21 contracts gained 0.72 and 0.82p/therm, respectively. Signs of LNG flows slowing down may have contributed towards this strength, but front month NBP remains vulnerable to short term unfavourable conditions. UK Baseload remained more cautious, Dec 20 Baseload slipped £0.50/MWh whilst the Summer 21 and Winter 21 contracts declined by 0.19 and £0.28/MWh, respectively. These losses are likely due to higher levels of wind outturn coupled with warmer temperatures, losses in the later dated contracts could suggest that these conditions may persist heading into this week.

Dec 20 EUAs gained €0.58/tonne with prices jumping on Friday, following sustained momentum above the €25/tonne support level. Candlestick observations shows a rangebound price between €25.50-27/tonne, therefore Dec 20 EUAs may not commit to a more pronounced direction until this range is broken. Elsewhere Jan 21 Brent gained an impressive $3.13/barrel, though it is important to note that gains have largely been driven by vaccine hopes rather then the underlying fundamentals of the oil market which makes front month contracts particularly vulnerable in the short term. Now that U.S. elections risks are largely minimised, the U.S. could follow in the steps of Europe and initiate localised lockdowns as COVID-19 remains rampant which could see turmoil across oil contracts.

Last Week’s Average Generation Stack

This Morning’s View

The energy complex has started the day upbeat. Nov 20 NBP is up 0.98p/therm, prices are remaining supported despite demand slipping to 71.8 mcm below seasonal norms with wind generation at 14 GW this morning. Front month prices may experience a turnaround in later trading sessions as warmer temperatures and wind generation increase throughout the week. Dec 20 EUAs are up €0.45/tonne though remains rangebound below €27/tonne, it is likely this level will be tested if upside momentum is sustained. Jan 21 Brent is up $0.69/barrel on greater market risk-appetite however the focus will be on FED comments this week on U.S. economic outlook coupled with inventory data. 
 

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