Weekly Energy Market Update - 30/09/2019
30 Sep 2019

Commodity

Unit

Settlement Price

Change Since 01 Jan 19

Change on Week

UK Gas NBP Nov 19

p/therm

44.13

-27.67%

-2.90%

UK Gas NBP Summer 20

p/therm

44.79

-7.66%

-1.57%

UK Gas NBP Winter 20

p/therm

53.94

-5.69%

-1.38%

UK Power Base Nov 19

£/MWh

51.39

-17.10%

-1.57%

UK Power Base Summer 20

£/MWh

48.80

-5.28%

-0.87%

UK Power Base Winter 20

£/MWh

55.52

-3.48%

-0.70%

Carbon EUA Dec 19

€/tonne

25.30

2.02%

-4.56%

Oil Brent Crude Nov 19

$/barrel

61.91

11.99%

-5.09%

 

Last week saw weakness develop over the energy complex. Much of the week was relatively muted with most gas and power contracts drifting lower. Some attributed this to a lack of bullish news, which allowed the front of the curve to trade more on fundamentals that look relatively bearish going into winter. This weakness is due to a strong supply mix buoyed by LNG and the return of key Norwegian gas flows, as well as high storage levels and more clement October weather forecasted. Fears over the UK, and wider, macroeconomic picture will also be contributing to the bearish outlook by limiting demand. This weakness on the front also saw the wider curve get dragged lower.

Carbon markets posted losses over the week with just over half of these losses felt early on Monday morning when the market may have reacted to the news that Thomas Cook had ceased to trade. Much of the rest of the week was spent trying to digest several news items including the UK Supreme Court finding Boris Johnson’s government to have acted ‘unlawfully’ in bringing Parliament to a close for several weeks. Weak economic data coming from continental Europe, relatively bountiful supply with an auction every day, and weakness in other energy complex contracts would have also helped the commodity to move lower. Despite Friday seeing the Dec-19 EUA contract take a brief dip below the €25/tonne mark, the contract managed to find support here and settle at €25.30/tonne, losing €1.30/tonne from the week’s open.

Oil markets remained volatile and news-driven but again lost value over the week. The Nov-19 contract opened the week at $65.23/barrel, however by Friday’s settlement the contract had lost just over $3.3/barrel. Weakening in crude pricing has been related to easing fears over supply with Saudi Arabia maintaining a strong return to full production as well as weaker demand-side forecasts amidst macro-economic uncertainty. Premiums from the drone attack look to be all but removed with the Nov-19 contract sitting around the $61/barrel mark. US-China tensions ticked higher with the US considering delisting Chinese companies from US exchanges, weighing on the curve as China is the world’s largest crude importer.

This Morning’s View
This morning has so far seen front month gas trade slightly higher while the Dec-19 and Summer-20 contracts have traded 0.2-0.35 p/therm lower than settlement. Front month may be feeling pressure from a short NTS due to elevated gas demand, currently sitting 50 mcm above seasonal norms. This unseasonably high demand is likely due to high gas-burn generation levels with low forecasted wind output sitting around the 3GW level as well as cooler temperatures. The other gas contracts mentioned are currently trading down in-line with weaker carbon and crude oil pricing with Dec-19 EUAs and Nov-19 Brent down €0.14/tonne and $0.54/barrel respectively.

Whilst we saw slightly weaker and more muted markets last week, the risk from bullish news headlines will remain at the forefront of traders’ minds. There are still several sources of potentially market-moving unresolved news including an official statement from ASN on Framatome welds in the French nuclear fleet, the Ukraine-Russia gas supply contract restructuring and US tensions with Iran and China. However, until there is clarity on these issues, the markets may continue to trade on relatively bearish fundamentals.
 

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The information provided in this market report is intended for Brook Green Supply Limited clients and subscribers only. The content is provided and intended for general information purposes only. All pricing stated in this market report is indicative, at the time of writing, and may not be attained in trading at any time after report publication. For the avoidance of doubt, Brook Green Supply Limited does not represent or endorse the accuracy or reliability of any of the information or content, expressed or implied, nor are we acting in any capacity as a fiduciary to you. Recipients of this market report must not rely on the information and are advised to take any necessary steps to validate such information, independently assess the economic risks and merits and make your own assessment, or appoint appropriate advisors, on any legal or tax consequences before acting upon it. Under no circumstances will Brook Green Supply Limited have any liability for any loss or damage caused by dependence on any information contained within this market report. Please contact our execution and solutions desk via tradingdesk@brookgreensupply.com for further information. 
 
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