Energy Wholesale Market Review – 06 October 2023

Headlines

This week, most tracked contracts registered losses, as strong EU gas storage levels continue to remain a prominent driver of prices ahead of the winter period. Similarly, LNG prices are likely to remain stable over the coming winter amid ample gas inventories in both Europe and Asia. Due to LNG’s status as the marginal price setter for the UK, stability across supply may act to keep prices down. As a result, day-ahead gas dropped 29.4% to 68.50p/th, and all seasonal gas prices fell, down by 5.1% on average with both summer 24 and winter 24 gas shrinking 6.2% and 4.9% respectively, subsiding to 109.75p/th and 126.25p/th. Following its gas counterpart, day-ahead power dropped 22.1% to £74.00/MWh, despite lower wind generation projections and rising demand forecasts for Monday. November 23 gas was down 13.0% at 93.30p/th, and December 23 gas decreased 8.9% to 109.50p/th. All seasonal gas contracts reduced this week, by an average of 5.1%. Summer 24 and winter 24 gas fell 6.2% and 4.9% to 109.75p/th and 126.25p/th, respectively. All seasonal power contracts traded lower this week, down on average by 4.2%, as summer 24 power declined 3.2% to £98.00/MWh, while winter 24 power fell 2.5% £115.50/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 22.1% to £74.00/MWh, following its gas counterpart lower.
  • Similarly, November 23 power slipped 9.6% to £89.00/MWh, and December 23 power decreased 4.0% to £101.35/MWh.

Annual October contract

  • Q124 power moved 10.7% higher to £109.00/MWh.
  • The annual April 24 contract lost 2.8% to £106.75/MWh, 57.3% lower than the same time last year (£250.00/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 16.6% to £77.60/MWh, following the trend registered across its baseload counterpart.
  • November 23 peak power declined 16.8% to £102.78/MWh, and December 23 peak power decreased 9.7% to £115.98/MWh.

Annual October contract

  • The annual April 24 peak power contract rose 4.0% to £118.70/MWh.
  • This is 54.3% lower than the same time last year (£260.00/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 4.2%.
  • Summer 24 power fell 3.2% to £98.00/MWh, similarly, winter 24 power decreased 2.5% to £115.50/MWh.

Seasonal peak power curve

  • All seasonal peak power contracts declined this week, down 3.9% on average.
  • Summer 24 and winter 24 peak power dropped 3.3% and 4.5% respectively, falling to £103.90/MWh and £133.50/MWh.

Commodity price movements

Oil and coal

  • Brent crude oil prices fell 6.4% last week to average $88.51/bl, registering the lowest price seen in a month on 06 October at $84.01/bl.
  • Contrasting last week, brent crude saw bearish movements, as concerns surrounding global demand growth prospects weighed on prices.
  • Similarly, demand issues were exacerbated due to the potential for an extended period of globally high interest rates, acting to offset OPEC+ supply cuts.
  • Further bearishness was found from increased oil output from Nigeria and Turkey, with the latter restarting operations on the Iraq-Turkiye pipeline that has been suspended for the past six months, and decreased Euro Zone manufacturing data.
  • The uncertainty around predicting the future of oil comes from the complex geopolitical situations surrounding the resource, influencing prices.

Carbon (UK and EU ETS)

  • The EU and UK ETS continued to register opposing price movements over the previous seven days. The EU ETS fell 3.0% to average €80.75/t whilst the UK ETS gained 13.5% to average £41.10/t, with the highest price in a month registered on 06 October at £42.80/t.
  • UK ETS carbon rose due to decreased projected wind power generation across the continent leading to increased reliance on fossil-fueled forms of power generation to make up for the loss.
  • EU ETS prices opposed their UK counterpart, with the EU ETS recording a price of €80.22/t on 03 October – the lowest in four months.
  • The British government released the auction calendar for UK Allowances for next year, outlining that the UK will release 69m carbon allowances for its ETS auction, the lowest level to date and 12% fewer than this year.
  • This reflects that the new net zero consistent cap for the scheme, announced in July 2023, is being implemented, while prices may rise following reduced UKA volumes.

Wholesale price snapshot – Friday-on Friday

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