Weekly Energy Market Update - 28/10/2019

28 Oct 2019

Home Weekly Energy Market Update - 28/10/2019



Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Nov 19





UK Gas NBP Summer 20





UK Gas NBP Winter 20





UK Power Base Nov 19





UK Power Base Summer 20





UK Power Base Winter 20





Carbon EUA Dec 19





Oil Brent Crude Dec 19





Last week saw much of the energy complex drift lower still. Near-curve UK gas contracts softened on the week with the front month NBP contract losing 1.55 p/therm and Summer-20 losing just over 1 p/therm despite large gains on Thursday. The strength on Thursday was related by some to fuel markets responding to expectations of colder weather for November as well as weakening sterling providing lift across the curve. Prices softening looked to be linked to bearish fundamentals. Storage levels remain high, several LNG cargoes are expected to reach UK shore in the coming weeks due to a weak Asian bid, and demand outlook looks hampered by Brexit on the horizon and a seemingly worsening macro-economic picture across the world’s largest economies.

Carbon markets also weakened over the course of the week with Dec-19 EUAs losing €0.73/tonne. Several news headlines gave carbon pricing mixed direction last week with the ASN confirming that EDF would not have to close any reactors down due to potentially faulty welding on Thursday morning providing some incentive for the contract to sell off. However, this was not enough to stop the contract posting a gain of c. €0.70/tonne of the day with strength in fuels pulling the contract higher. UK politics and Brexit headlines largely weakened carbon pricing with Johnson gaining Parliamentary support for his deal but not for his quick ratification timeline. This not only gives Parliament more time to pick the deal apart, potentially altering it to a point that negotiations have to be reopened, but also triggered Johnson halt proceedings and look to call a general election in a bid to gain a majority and push his deal through Parliament with minimal changes and in a timely manner. Power pricing followed gas and carbon lower over the week with front month and season baseload losing £0.65/MWh and £0.58/MWh respectively.

Oil markets were stronger over the week with Dec-19 Brent rising by almost $2.80/barrel. The commodity posted most of these gains on Wednesday when the EIA reported that US crude stockpiles had fallen for the first time in weeks despite polls beforehand having the market pricing in yet another rise. Oil contracts were also supported over the week by improving US-China trade talks as well as talks of a coordinated effort from OPEC, Russia and Saudi Arabia to help to stabilise the market. However, news of slowing economies across the globe could have provided resistance to further gains with the release of weak German employment numbers and Chinese industrial profits falling for the second straight month.

This Morning’s View

This morning has seen UK gas open weak with the front month NBP contract opening 0.45 p/therm below settlement and has since traded down a further 1.20 p/therm. Dec-19 and Summer-20 contracts have also posted losses of 0.80 p/therm and 0.53 p/therm this morning. This could be related to a long NTS with a current oversupply of c. 10 mcm despite demand rising to 280 mcm. This length is coming from Langeled flows at 73 mcm compared to levels in the 50s for much of last week as well as around 83 mcm of LNG terminal output. Carbon and oil markets have also traded down in the morning’s session with Dec-19 EUAs down €0.32/tonne and Dec-19 Brent down $0.36/barrel. The week ahead could see the complex soften further with no change to already bearish fundamentals, however Brexit headlines and the release of numerous month- and quarter-end economic datasets could provide volatility across the complex.

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