Energy Wholesale Market Review – 15 December 2023

Headlines

This week, all power and gas wholesale contracts fell, continuing the overall bearish movement seen across contracts throughout 2023 to date. Day-ahead gas fell 22.2% to 75.25p/th, following increased temperature forecasts acting to soften gas-for-heating demand, providing bearish support. Day-ahead power fell 24.9% to £65.00/MWh, with a rise in wind generation projections, alongside a reduction in consumption forecasts, acting to loosen system margins. January 24 gas was down 16.0% at 83.40p/th, February 24 gas decreased 16.1% to 84.40p/th. All seasonal gas contracts declined last week, down by 8.6% on average, while both summer 24 and winter 24 gas dropped 13.8% and 9.5% respectively, subsiding to 84.00p/th and 102.50p/th. All seasonal power contracts declined this week, down on average by 8.4%, as summer 24 power decreased 11.4% to £74.90/MWh, while winter 24 fell 8.1% to £93.30/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 24.9% to £65.00/MWh, following an increase in wind outturn forecasts and a drop in consumption projections acting to loosen system margins.
  • January 24 power slipped 13.6% at £79.75/MWh and February 24 power decreased 12.5% to £82.25/MWh.

Annual October contract

  • Q124 power moved 20.4% lower to £80.75/MWh.
  • The annual April 24 contract lost 9.6% to £84.1/MWh, 64.2% lower than the same time last year (£235/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 20.4% to £91.50/MWh, following its baseload counterpart lower.
  • January 24 peak power declined 12.2% at £99.40/MWh, and February 24 peak power decreased 10.7% to £105.25/MWh.

Annual October contract

  • The annual April 24 peak power declining 8.3% to £96.55/MWh.
  • This is 62.6% lower than the same time last year (258.40/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 8.4%.
  • Summer 24 power decreased 11.4% to £74.90/MWh, while winter 24 fell 8.1% to £93.30/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 8.3% on average.
  • Summer 24 and winter 24 peak power dropped 8.9% and 7.8% respectively, falling to £82.70/MWh and £110.40/MWh.

Commodity price movements

Oil and coal

  • Brent crude continued to register a downward movement across the last week, falling 3.2% week-on-week to average $75.31/bl.
  • This decrease can be mainly attributed to lower demand from the world’s largest crude importer, as data released by China’s statistics bureau on Friday showed refinery runs in November dropped to their lowest level since the beginning of the year.
  • Moreover, gains were stunted by the International Energy Agency forecasting that world oil consumption will rise by 1.1mn barrels per day in 2024, an increase of 130,000 bpd from its previous forecast.
  • As a global commodity, oil will remain volatile as geopolitical events play out around the world. Prices are likely to remain stable in the near-term as decreased demand from China offsets supply cuts from OPEC+ countries.

Carbon (UK and EU ETS)

  • Last week we saw a continued bearish trend across the both carbon markets, as higher levels of wind generation affected the amount of fossil fuelled power generation needed to meet demand, in tandem with rising temperatures in the UK specifically, easing heating demand.
  • EU ETS carbon dropped 2.4% to average €68.20/t, and UK ETS carbon fell 5.3% to average £33.60/t.
  • Prices continue to fall, despite the upcoming expiry of the December auctions over the Christmas period – running from 13 December 2023 to 10 January 2024 for the UK ETS, and the last auction date for the EU ETS happening on 18 December – highlighting lower demand
  • EU ETS carbon prices dropped to the lowest level seen since October 2022 on 14 December, at €68.95/t and UK ETS carbon prices dropped to the lowest level recorded since the inception of the scheme in 2021, at £32.95/t on 11 December.

Wholesale price snapshot – Friday-on Friday

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