WEEKLY ENERGY MARKET UPDATE - 31/10/2022

Last Week’s Pricing & Commentary  

Early last week saw markets come off hard, while still littered with volatility as prices were jumping around and very large trading ranges emerged across most contracts. However, the markets well and truly closed in a bullish manner as front month contracts in the UK and Europe neared delivery. This was despite the fact that the regions were experiencing higher than average seasonal temperatures, wind generation remained healthy and LNG supplies continue to arrive in large volumes. An interesting disconnect occurred during the week as Q123 NBP was trending down, its UBL counterpart stopped tracking it and rather switched to mirror French power prices. This is due to the fact that at the tightest of times the UK grid will likely need to import power via interconnectors from Europe and therefore, need to remain competitive with emerging European price premiums. Although the week ended bullishly it’s important to note that the markets were still on the whole for the week very bearish. NOV22 UBL was down 26% closing at £241.76/MWh. Centrica’s announcement of the reopening of the Rough gas storage facility could help reduce fears surrounding the tightest of winter day supplies, potentially further easing risk premiums out of NBP contracts over the winter. Finally, Brent crude while overall up compared to the week before gaining 5.83%, did experience losses over the trading week as demand uncertainty continued in China and ExxonMobil/Total oil refineries reopened after being plagued by strikes, one fundamental creating demand destruction while the later eased supply tightness. EUAs and UKAs reversed their bearish trends of late and gained 18.81% and 11.04% respectively, bringing both contracts in positive gains on the year. Ultimately, Sunak’s appointment as UK PM has helped to stabilise Sterling’s slide of recent weeks, helping to improve the economic outlook for the UK.

Last Week’s Average Generation Stack

This Morning’s View

Temperatures forecast above seasonal averages for the next fortnight, therefore limiting gas for heating demand, thus likely pressuring prompt contracts. Wind generation over the course of this week is expected to average 13.7GW, representing further bearish weather, this when combined with high levels of LNG should also pressure prompt and front month contracts.

Wider News

Wheat climbs nearly 6% after Russia suspends Black Sea pact | Reuters

UK's FTSE 100 dips as commodity stocks weigh | Reuters

Dover migrant centre: 'Horror' over fire attack | BBC News

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