Weekly Energy Market Update - 29/07/2019
29 Jul 2019

Gas and power spent the week continuing to retrace the gains made early in the month following the confirmed extended outage of Norway’s Nyhamna gas processing plant. The UK Winter-19 NBP gas contract began the week by opening higher than the previous weeks close at 53.6 p/therm but showed unwillingness to sustain any pushes higher and steadily fell throughout the week, eventually closing at 50.316 p/therm, a decrease of 6.13%. 

UK power largely followed with UK Winter-19 baseload power, expiring on Friday at £55.97/MWh, a decrease of 2.71% for the week. As we draw closer to August delivery, the UK Aug NBP gas contract showed volatility with a 2.83p/therm move upwards on Tuesday before dropping 1.86 p/therm the following day. Despite these large movements, the contract does seem to have found some stability when compared to the 10 p/therm changes seen in the previous two weeks. It was a different story for UK August baseload power contract which only saw a £0.03/MWh change over the week and while Tuesday did post a gain of £1.53/MWh, the remainder of the week saw the contract display losses to close at £39.78/MWh. 

In a week where many expected carbon to breach the €30/tonne mark, the Dec contract rose to highs of €29.95 before showing some resistance to end the week where it settled at €28.29. Oil was relatively stable with the Sep 19 contract trading sideways and closing at $63.46/barrel, $0.39/barrel higher than the weeks open. Talks were held in Vienna to salvage Iran nuclear deal and with a senior Iranian official stating the atmosphere had been “constructive”, so we may see further stability for oil although tensions still remain which provide some upside risk. Warmer UK weather last week, with highs of 38.7°C reached in Cambridge on Thursday, led to renewables accounting for a higher proportion of the generation stack than previous weeks. Over the week, gas burn generation rarely breached the 50% mark as solar and wind made up between 30-40% of the stack. Despite the higher temperatures experienced and a good showing from renewables, the UK still experienced above average demand on the gas system but there does remain length in the system to ease price risk. The pound has shown further weakness as the government states a no-deal Brexit is a real possibility and preparations are underway for the likelihood. 

This morning, power and gas opens have been muted as holiday season starts to take full effect with traders away from screens. At time of writing, carbon is the biggest mover and has already made gains of €0.85, which should be supportive for power and gas. 
 

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