Energy Wholesale Market Review – 05 April 2024

Headlines

This week represented a predominantly bearish picture for wholesale gas and power contracts. Primarily, we observed losses due to greater week-on-week wind generation reducing the requirement for more expensive gas-fired assets to meet domestic demand requirements. Likewise, the return of the Hartlepool 2 and Heysham 2 nuclear reactors after continued outages led to higher available power capacity to the network across the week. As a result, day-ahead gas fell 8.1% to 62.75p/th, with the arrival of above-average temperatures in the week ahead acting to limit domestic heating demand. Likewise, day-ahead power fell 11.7% to £58.25/MWh, weighed on by losses across its gas counterpart. Across the front-month contracts, May 24 gas was down 5.0% at 64.80p/th, and June 24 gas decreased 4.5% to 64.60p/th. Most seasonal gas contracts declined last week, down by 0.3% on average, with winter 24 and summer 25 gas dropping 1.5% and 0.8% respectively, subsiding to 81.00p/th and 75.20p/th. All seasonal power contracts declined this week, down on average by 3.1%, as winter 24 power decreased 2.9% to £74.50/MWh, and summer 25 fell 3.2% to £66.10/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 11.7% to £58.25/MWh, as greater wind generation throughout the week led to lower reliance being placed on gas-fired assets to meet demand
  • May 24 power slipped 5.9% to £55.50/MWh and June 24 power decreased 3.6% to £58.25/MWh

Annual October contract

  • Q324 power moved 2.0% lower to £60.75/MWh
  • The annual October 24 contract lost 3.0% to £70.30/MWh, 47.1% lower than the same time last year (£133.00/MWh)

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 5.7% to £54.25/MWh, following its baseload counterpart lower
  • May 24 peak power declined 0.6% to £58.95/MWh, and June 24 peak power decreased 2.9% to £61.10/MWh

Annual October contract

  • The annual October 24 peak power fell 0.7% to £81.92/MWh
  • This is 56.7% lower than the same time last year (£189.00/MWh)

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 3.1%
  • Winter 24 power decreased 2.9% to £74.50/MWh, while summer 25 fell 3.2% to £66.10/MWh

Seasonal peak power curve

  • All seasonal peak power contracts declined this week, down 2.9% on average
  • Winter 24 and summer 25 peak power dropped 3.5% and 2.3% respectively, falling to £87.10/MWh and £70.75/MWh

Commodity price movements

Oil and coal

  • Brent crude experienced another bullish week following an attack on Russia’s third largest oil refinery, limiting flows from the world’s second largest oil exporter and tightening global supply levels amid maintained OPEC+ supply cuts of 2.2 million barrels per day
  • Likewise, concerns of a growing conflict in the Middle East, and signs of increased demand across China and the US provided further bullish market sentiment
  • This resulted in a weekly increase of 3.6% to average $89.55/bl, with Brent crude reaching the highest level seen since October 2023 at $90.72/bl on 5 April
  • Due to the sensitive nature of oil prices, as they are easily swayed by geopolitical situations, the price is expected to remain volatile into the future
  • The Bank of America Global Research has increased its Brent Crude forecast for 2024, with OPEC+ supply cuts and geopolitical tensions set as the primary price drivers. It anticipated prices will peak in the summer, at ~$95/bl, and overall average ~$86/bl

Carbon (UK and EU ETS)

  • Following much higher levels of wind generation across Europe and the UK, ETS prices recorded drops due to lower reliance being placed on gas-fired generation to meet demand
  • Likewise, market sentiment showed little reaction to the publication of the verified emissions data for 2023, further strengthening the bearish movements
  • As a result, UK ETS carbon fell 9.1% to average £34.73/t, and EU ETS carbon traded 6.5% lower to €58.70/t
  • ETS prices are expected to remain somewhat level in the short-term, finding bullish support from forecasts of reduced wind generation in the week ahead, however above-average temperatures are set to curb thermal generation and EUA demand by extension
  • As we progress further into the spring season, and temperatures get warmer, auction demand will likely see a decrease, which will contribute to a decrease in carbon prices

Wholesale price snapshot – Friday-on Friday

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