Weekly Energy Market Update - 30/09/2019

30 Sep 2019

Home Weekly Energy Market Update - 30/09/2019



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 Nov 19





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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