WEEKLY MARKET ENERGY UPDATE - 12/09/2022

Last Week’s Pricing & Commentary  

The ever-changing energy industry saw another week of volatility as governments across Europe looked to protect their consumers and economies from large scale increases in prices going to winter. Liz Truss was announced as the new UK Prime Minister and made a large energy policy her first action. Details around the policy still remain thin but the announced freeze of domestic price cap prices at £2500 for average household usage should provide some relief to domestic consumers. Business support is expected with a price cap also mentioned, the mechanics of this remain to be announced. There was a lack of detail on strategy to help reduce demand although it seems like the market will start pricing this in soon. The market drifted lower over the week on this news. Power was particularly weak, with Oct-22 losing £72.82/MWh and Winter-22 down £125/MWh. Gas saw smaller decreases of 31p/therm on Oct-22 contracts and 6.6p/therm on Winter-22 with a small increase of 22p/therm on Summer-23 contracts. Carbon was particularly weak across the weak, EUAs falling to 6-month lows on poor economic outlooks from Europe, with recession looming. UKAs followed the move as the spread between decreased. EUAs decreased €11.81/tonne and UKAs £19.08/tonne on the week. Brent hovered around the $92/barrel mark all week as the market continues to battle supply and demand. Wind generation picked up a small amount, contributing more to generation than it had over previous months. Gas to power continues to make up near half of the generation stack.

Last Week’s Average Generation Stack

This Morning’s View

The start of the week has seen markets open bearish. TTF opens down 5.26% with front month gas now trading below €200/MWh, the first time since the start of August. NBP has followed these moves, Oct-22 contracts now trading at 360p/therm, having lost 18.3p/therm from Fridays settlement. Power, as always, is expected to be driven by moves in gas. The French government is expected to introduce domestic policy that is expected to price cap energy costs as Europe looks to protect its economy from the increase in prices. Demand continues to drift lower as high prices bite and consumers look to reduce consumption. The weekend saw a surprise counter attack in Eastern Ukraine as Ukrainian armed forces recaptured large swathes of land. This is likely to apply pressure to the Kremlin and ramp up question marks on long term goals. The NTS is forecast 2.8mcm short with wind generation at around 8GW this morning.

Wider news

Russian gas flows to Europe steady while Nord Stream 1 remains shut | Reuters

‘Insulating homes this winter could be cost neutral’

EU ministers set to back price cap, demand cuts

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