Weekly Energy Market Update - 28/09/2020

28 Sep 2020

Home Weekly Energy Market Update - 28/09/2020

Last Week’s Pricing & Commentary

Commodity

Unit

Settlement Price

Change Since 01 Jan 20

Change on Week

UK Gas NBP Oct 20

p/therm

31.91

-9.37%

4.66%

UK Gas NBP Winter 20

p/therm

38.60

-11.69%

0.23%

UK Gas NBP Summer 21

p/therm

33.75

-11.07%

-0.74%

UK Power Base Oct 20

£/MWh

42.92

-3.22%

-0.26%

UK Power Base Winter 20

£/MWh

50.65

5.87%

-0.80%

UK Power Base Summer 21

£/MWh

43.25

3.51%

-1.57%

Carbon EUA Dec 20

€/tonne

26.17

13.64%

-5.69%

Oil Brent Crude Nov 20

$/barrel

41.92

-30.13%

-2.53%

The week began with sellers hitting the carbon market, sweeping weakness into gas and power contracts whilst worries of a second lockdown further compounded losses in the contracts. Dec 20 EUAs dropped €1.35/tonne on the day, drifting ever closer to the mid €20’s despite continued bullish news that many believe carbon prices could rocket towards €50/tonne in the medium to long term due to the 2030 climate target. Weakness filtered into gas and power markets with Winter 20 NBP and baseload dropping 0.74p/therm and £0.69/MWh. Adding to this, the UK government pointed towards 50,000 new coronavirus cases per day in the near future if the virus isn’t controlled, which heaped further bearish sentiment across the market. On the other hand, losses at the front of the gas and power curves were controlled by cooler temperatures arriving and forecast for the coming weeks.

Tuesday saw changing sentiment with gas, power and carbon ticking up, helped by increased demand due to cooler weather whilst reduced Norwegian supply added to bullish fundamentals at the front of the curve. Gas and power contracts on Wednesday and Thursday were characterised by volatility with wide trading ranges and large gaps at the open although within day movements were quite negligible. Reduced Norwegian flows, demand rising due to cooler weather and consistently rising cases of the coronavirus in the UK and much of Europe continued to influence the energy markets. Additionally, with front month contracts soon to expire, it was expected that many were (or would be) rolling front month contracts as views on demand recovery in the UK became less clear the past week. Oil was virtually flat on the week after a blockbuster day on Monday where the Nov 20 brent contract lost $1.57 and traded in a $2 range. 

Last Week’s Average Generation Stack

 

Gas

Wind

Solar

Hydro

Nuclear

Imports & Exports

Biomass

Pumped Storage

Coal

GW

12.22

8.92

4.45

0.19

5.26

1.66

1.79

0.03

0.32

%

35.97

26.28

13.10

0.56

15.48

4.88

5.26

0.08

0.93

This Morning’s View

A quiet open this morning with carbon and oil posting small movements whilst gas pushes higher, particularly at the front end of the curve. Oct 20 NBP is up 0.89p/therm from settlement with similar gains occurring amongst near term NBP contracts up to the end of the year. Carbon has risen this morning with Dec 20 EUAs up €0.18/tonne from settlement as the contract continues to hover around the mid €26’s. Oil looks set to continue its gradual journey lower as Nov 20 brent is down $0.23/barrel from settlement. As wind output reduces from the highs of the last 3 days, we could see some tightness as demand grows with lower temperatures increasing the need for gas heating. Moreover, with the NTS opening short and renewables yet to get going with wind generation at around 5GW and expected to continue to drop from yesterday’s levels, we could see further support for pricing. 
 

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