Weekly Energy Market Update - 28/06/2021

Last Week’s Pricing & Commentary

Another bullish week across the energy complex with fundamentals unchanged as renewable output remains lower, continued cooler temperatures, and a strong Asian LNG bid all mean that injection season has faltered. On Monday, gas prices rallied early on, with the front-month NBP contract trading at levels not seen since January as bullish sentiment continues seemingly unchecked. However, sentiment did fade with contracts mostly dropping to Friday’s closing levels by the end of the day, although still posting settlement to settlement gains. Gas consistently looked to carbon for support and although sometimes volatile, the commodity was often available to lean on. Jul 21 NBP gained 8.05p/therm on the week, stopping just shy of 80p/therm at settlement on Friday. Further along the curve, Winter 21 and Summer 22 NBP managed to increase by 6.86p/therm and 3.78p/therm, respectively. Demand has remained below seasonal norms, despite some cooler and wetter weather which could help prices reverse if we experience some warmer and sunnier weather. Another glimmer of hope on the horizon is that Nord Stream 2 will come online in good time, and we will see a pick-up in Russian gas flows to Europe.

Power prices reacted similarly to gas along the curve, gaining £6.97/MWh, £5.58/MWh, and £3.78/MWh across the Jul 21, Winter 21, and Summer 22 baseload contracts. Carbon prices managed to post another positive week as Dec 21 EUA’s rose by €3.15/tonne to settle above €55/tonne. Having lifted above a recent trading range, the contract eyed contracts highs of near €57 but cold feet or any indication of resistance could see the contract reset back towards its recent range. UKAs, as always, tracked EUA’s to finish the week £2.20/tonne higher, finding clear support from EUA’s which posted settlement to settlement gains all week, even after a slight within day loss on Friday. Brent prices stepped higher last week as drawdowns on U.S crude stocks, growing optimism over global fuel demand recovery and expectations that OPEC+ will not rush to force supply back into the market ultimately helped the Aug 21 Brent contract settle $2.67/barrel up come Friday. 

Last Week’s Average Generation Stack

This Morning’s View

A slow start to the morning has now seen carbon, gas, and oil all stoop lower. Dec 21 EUAs are down €0.14/tonne, dropping below the €55/tonne level which could see a downside below €54/tonne and back to earl June’s trading range. Gas, even with little volume traded, has slowly begun to follow carbon and Jul 21 NBP is currently 0.73p/therm below settlement. With prices consistently moving higher recently many will comment that continued moves higher were unsustainable but it is also possible profit-taking has been encouraged from slight weakness at the end of Friday following a strong week. Aug 21 Brent also sits $0.27/tonne below settlement, as attention shifts to the OPEC+ meeting due to be held this week. 
 

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