Weekly Energy Market Update - 26/10/2020

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Last Week’s Pricing & Commentary

Last week ended mostly positive for the energy mix, with the exception of oil. Front month Nov 20 NBP was at the forefront, posting a gain of 2.87p/therm, with later dated contracts Summer 21 and Winter 21 posting gains of 1.21p/therm and 0.61p/therm, respectively. NBP prices have been supported by below average temperatures coupled with lower wind outturn, although demand has remained below seasonal norms across the week. An unplanned outage in Norway at the Oseberg field extended into Friday, prompting front month NBP higher. The unpanned outage has restricted 8.5mcm/day worth of gas supply. Power was supported by gains in NBP contracts, UK baseload Nov 20 gained £1.58/MWh followed by Summer 21 gaining £1.02/MWh. Falling temperatures have increased the demand for gas-generated power, further supported by lower wind outturn and low LNG arrivals. Dec 20 EUAs gained €0.69/tonne after prices failed to hold above a key support at €25/tonne and consequently slipped lower.

Elsewhere oil was volatile across the week, Nov 20 Brent slipped $0.92/barrel below settlement as market participants began to doubt any fiscal relief being agreed upon in U.S. congress, in the face of a rampant COVID-19 outbreak and global localised lockdown initiations. A rise in gasoline inventory numbers also suggests lower consumer demand which added further weight to prices.

Last Week’s Average Generation Stack

This Morning’s View

The energy mix has started the week bearish across the board. Nov 20 NBP is down 0.89p/therm followed by a slip of 0.46p/therm in the Summer 21 contract. Temperatures are forecasted to be 0.5-1.50C above norms with wind outturn to remain on the higher side this week, thus pressuring front month NBP prices. Additionally, stronger expected flows of LNG this week could further weigh on NBP prices. Dec 20 EUAs is down €1.09/tonne, as prices fail to hold above the €25/tonne mark. Prices may retreat towards €24/tonne, before making any noticeable upside attempts. Dec 20 Brent is down $1.03/barrel amid pessimism that a U.S. fiscal stimulus package can be passed before next week’s presidential election. An outbreak in COVID-19 across the U.S has sparked demand fears, further weighing on prices.

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