Weekly Energy Market Update - 29/11/2021

Last Week’s Pricing & Commentary  

Last week saw gas prices push higher overall, with days of strength in the middle of the week helping contracts to post gains, although capped either side by losses with ensured price increases kept in check. Dec 21 NBP sank below settlement at the start of the week, decreasing by 8.34p/therm between settlements, despite stepping higher in the middle of the day. Dropping wind output and colder temperatures putting strain on gas was outweighed by nervousness around resurgent COVID-19 cases in Europe as Austria entered lockdown and Germany reports sharp rises in cases. With so much of the attention this winter on Nord Stream 2, another beast from the east type of scenario in Europe and general European storage levels, COVID-19 has once again reared its head and could force prices lower if restrictions and lockdowns are re-imposed. Gains through the middle of the week looked to be linked to cooler temperatures, a La Nina event being called in the Pacific basin, and headlines around Gazprom shutting supply to Moldova on account of unpaid bills for recent deliveries. Dec 21 NBP ended the week 2.57p/therm higher, with a weak day on Friday helping to keep gains for the week quite modest.

Power, on the other hand, found support from carbon hitting lofty new heights. Dec 21 EUA’s hit a new high of €75.05/tonne although the contract eventually settled off this level by the end of the week. This strength helped to encourage power into gains that outstripped gas. Dec 21 baseload rose £21.37/MWh by the end of the week. The front-season power contracts were tamer, although still stronger than gas, with Summer 22 and Winter 22 baseload gaining £3.83/MWh and £6.67/MWh, respectively. Brent slipped lower last week, finding weakness from the emergence of the newly found Omicron Covid variant which is likely more transmissible than the Delta variant (the current most transmissible variant), and some worries around vaccine efficiency against the new variant. Jan 22 Brent dropped $6.17/barrel on the week, finding some support from the amount of oil released in the Strategic Reserves being called into question along with OPEC+ looking to match their supply cuts in line with this level. 

Last Week’s Average Generation Stack

This Morning’s View

Gas has rocketed this morning, quickly seeing gains of more than 15p/therm through to Q1 22. Dec 21 NBP is up 17.42p/therm with the contract close to expiry and attention due to shift to Jan 22 as it becomes the new front-month contract. Dec 21 EUA’s are up €1.98/tonne above settlement, providing a bullish backdrop for power once it gets going. Brent has found support from some headlines stating vaccines seem to be effective against the Omicron variant, helping ease the worries around economic recovery, and seeing the Jan 22 contract up $3.21/barrel.
 

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