Weekly Energy Market Update - 30/11/2020

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Last Week’s Pricing & Commentary

Last week favoured commodities with the energy complex posting strong gains across the week. The NBP curve was well supported as front month Jan 21 NBP (previously Dec 20) gained 3.54p/therm with settlement prices reaching new highs following colder temperatures. This saw demand for natural gas jump to 40 mcm above seasonal norms by Friday. Additionally, wind outturn fell sharply from Wednesday onwards, reaching as low as 1GW, prompting further support on NBP contracts. These short-term bullish factors also fed momentum into later dated Summer 21 and Winter 21 contracts which gained 1.93p/therm and 1.52p/therm respectively, though high LNG flows remain a concern which may see gains less pronounced heading into December. The UK Baseload curve tracked gains in NBP as Jan 21 Baseload (previously Dec 20) gained £3.83/MWh, whilst later dated Summer 21 and Winter 21 contracts gained £1.53/MWh and £1.43/MWh posting similar gains to NBP contracts.

Oil has remained volatile, driving on speculation, and mostly ignoring bearish current fundamentals. Jan 21 Brent gained $3.10/barrel on hopes of highly effective vaccines being deployed in early 2021 which could lead to greater oil consumption as global restrictions could be eased. Additionally, it was widely expected that OPEC would announce supply cut extensions following a meeting over the weekend, though this expectation was disappointed as the group failed to deliver any news on oil production cut extensions which may pressure front month Brent this week. Elsewhere, Dec 20 EUAs lagged behind its peers and gained only €0.78/tonne on the week. This is due to sideways price action which saw prices trapped between only €25-27.50/tonne. However, a recent breakout above €28/tonne may indicate more pronounced bullish momentum to come.

Last Week’s Average Generation Stack

This Morning’s View

Jan 21 NBP is up 1.06p/therm as strike threats in Norway trigger tight supply concerns coupled with temperatures that are expected to average 1°C below seasonal norms this week. Though wind is expected to pick up to 9GW today which may cap additional gains in front month contracts. Dec 20 EUAs have gained €0.77/tonne as prices sustain momentum above €28/tonne, opening the possibility for €30/tonne to be met this week. Jan 21 Brent is down $0.89/barrel amid a failure from OPEC to successfully negotiate supply cut extensions, though there is a meeting later today which may cause volatility in oil contracts.

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