17 June 2022

Headlines

This week favoured an overwhelmingly bullish outcome for gas and power prices, both in the near-term and further along the forward curve – underpinned by the uncertatinty surrounding future energy imports into European energy markets from Russia. Day-ahead gas rose 81.3% to 145.00p/th, buoyed by system undersupply as multiple outages at Norwegian gas fields limited Norwegian gas flows. Near-term gas also took direction from European gas markets which saw prices spikes in response to a ~40% drop in Russian flows via Nord Stream 1. Day-ahead power rose 88.9% to £170/MWh, following the strong bullish momentum gained from its equivalent gas contract, and periods of low wind output. July 22 gas was up 55.7% at 235.53p/th, and August 22 gas increased 51.0% to 268.97p/th. Longer-dated gas contracts were buoyed by concerns over winter storage supply, amid falling Russian flows alongside an extended 90-day outage at the US Freeport LNG terminal. All seasonal gas contracts experienced gains this week, rising by 14.3% on average, while both winter 22 and summer 23 gas increased 31.0% and 14.8% respectively, lifting to 312.90p/th and 204.30p/th. Similarly, seasonal power contracts followed their gas counterparts, up on average by 9.6%, as winter 22 and summer 23 expanded 21.8% and 8.8% respectively, rising to £299.55/MWh and £185.00/MWh.

Baseload electricity
  • Day-ahead power rose 88.9% to £170.00/MWh, supported by periods of low wind generation and rising near-term gas prices.
  • July 22 power climbed 36.4% at £225.00/MWh and August 22 power increased 43.5% to £244.00/MWh.
  • Q322 power moved 35.9% higher to £251.46/MWh.
  • The annual October 22 contract rose 1.8% to £211.75/MWh, 258.9% higher than the same time last year (£59/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was up 84.2% to £175.00/MWh, following baseload power higher.
  • July 22 peak power gained 25.6% at £219.04/MWh, and August 22 peak power increased 26.2% to £234.03/MWh.
  • The annual October 22 peak power rose 10.8% to £279.5/MWh.
  • This is 378.8% higher than the same time last year (58.37/MWh).

Forward curve comparison


 

Annual April contract


 

Seasonal power prices

Seasonal baseload power contracts


 

 

Seasonal baseload power curve


 
 

  • All seasonal power contracts boosted this week, up on average by 9.6%.
  • Winter 22 and summer 23 expanded 21.8% and 8.8% respectively, rising to £299.55/MWh and £185.00/MWh.
  • All seasonal peak power contracts declined this week, down 18.6% on average.
  • Winter 22 and summer 23 peak power increased 13.9% and 6.0% respectively, rising to £350.75/MWh and £208.25/MWh.
Commodity price movements
 

Oil and Coal


 

Carbon
  • Brent crude prices fell 1.3% this week to average $120.31/bl.
  • The movements of Brent crude prices varied in the week, with conflicting market fundamentals at play.
  • Bullish drivers in the form of tight global supply and oil embargoes on Russian exports were ultimately overshadowed by rising Covid-19 cases in Beijing, and the IEA expecting world oil demand to rise more than 2% to a record high of 101.6 million barrels per day in 2023.
  • Elsewhere, concerns over a recession – amid rising inflation and interest rate hikes – placed some suppressive influence over Brent crude prices too.
  • API 2 coal fell 1.1% to average $223.80/t.
  • The EU and UK ETS experienced mixed price movements this week. Subsequently, the EU ETS climbed 1.7% to average €83.43/t whereas the UK ETS fell marginally, down 0.3% to £81.65/t.
  • The EU ETS gained support from on-going EU sanctions on Russian fuel imports which continue to drive gas market volatility on the continent and lift EUA prices as a result.
  • The UK ETS, saw trading activity influenced by recession fears and gas price voltatility, with some traders selling their allowances to cover positons in the gas market. Bearishness also stemmed from easing gas-for-power demand amid rising temperatures.
Wholesale price snapshot 


 

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