Weekly Energy Market Update - 25/11/2019

25 Nov 2019

Home Weekly Energy Market Update - 25/11/2019

Last Week’s Pricing & Commentary



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Dec 19





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Dec 19





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Jan 20





Last week saw pricing across much of the energy complex move higher. Front month gas gained 1.89 p/therm over the course of the week as prompt markets firmed, driving the contract upwards. The NTS was short for quite a bit of the week on Norwegian field outages, which saw further drawdowns on medium-range storage now sitting at 84% full. Contracts further down the curve were also lifted higher over the week with Summer-20 and Winter-20 contracts posting respective gains of 1.19 p/therm and 0.85 p/therm. Whilst these gains have lifted the curve off the lows, it is important to note that Dec-19 pricing is still 26 p/therm lower than the same time last year and the last time the contract was seen at these levels was in May 2016. It seems much of the market are still holding on to bearish outlooks for the remainder of winter due, at least in part, to the amount of LNG expected to reach British shores in the coming weeks. Four vessels are due to deliver to the UK before the end of the month and a further seven expected in the first few weeks of December. Once Norwegian outages end and LNG deliveries are complete, we could see storage begin to be replenished and bullish pressure subside. However, continued periods of below normal temperatures could keep pressure on the NTS.

UK power was lifted higher over the course of the week on strength in gas and carbon. Dec-19, Summer-20 and Winter-20 baseload contracts gained £1.88/MWh, £1.86/MWh and £1.38/MWh respectively. Interestingly, for much of the week the UK was exporting to France as colder temperatures caused French demand to soar in conjunction with reduced nuclear output, however this stopped on Friday which may have helped to lessen bullish pressure on day-ahead pricing. Dec-19 EUAs lifted €0.82/tonne from Monday’s open to Friday’s settlement helping the contract to regain the €24/tonne level and all but retrace the prior week’s heavy losses in a week of short covering and trading up on complex momentum. Brent Crude spent the first half of the week trading down on the API US inventory report showing a 6 million barrel rise and bearish news around US-China trade talks and the possibility of some OPEC+ members refusing to back deeper supply cuts. However, the official EIA stockpile report pushed pricing higher as US crude stocks grew by just 1.4 million barrels and that Cushing, the delivery point for WTI, had seen a 2.3 million barrel storage drawdown. Reports that OPEC+ was likely to extend supply cuts until June also provided support. US-China trade talks are certainly still dominating sentiment on oil pricing with comments on the US’ and China’s willingness to return to negotiations and roll back tariffs causing pricing to swing.

This Morning’s View
This morning has seen further strengthening of UK gas. Front month is currently 1 p/therm above Friday’s settlement while Q1-20 and Summer-20 are up 0.64 p/therm and 0.56 p/therm respectively. While the NTS is reported as slightly undersupplied, Langeled flows are back up above 72 mcm as Troll’s outage ended shortly after market close on Friday. This return of capacity could see prompt gas pricing soften over the coming days, also allowing for futures to move to the downside. Dec-19 EUAs are currently €0.04/tonne below settlement despite opening €0.21/tonne above Friday’s close. This move down may ease pressure on the NBP and could provide some resistance to power on the open. Jan-20 Brent is up $0.10/barrel as positive comments came from the US over the weekend suggesting a preliminary deal between the US and China could be reached before the end of the year.

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