Energy Wholesale Market Review – 20 October 2023

Headlines

This week power and gas contracts broadly continued to follow the bearish trend seen across much of 2023 to date, inclusive of longer-term contracts. We observed above average wind generation for large periods across the reporting window – acting to supress gas-fired generation demand, and the announcement that strike action across Australian LNG terminals will not go ahead, acting to loosen constraints on global supply. Subsequently, day-ahead gas fell 15.6% to 114.00p/th, despite the expectation of both higher heating demand as well as forecast increases in gas-for-power demand, as we progress into next week. Following its gas counterpart lower, day-ahead power fell 20.0% to £104.00/MWh, despite tightened system margins projections for early next week. November 23 gas was down 7.7% at 128.25p/th, and December 23 gas decreased 1.7% to 145.00p/th. Most seasonal gas contracts declined last week, down by 0.1% on average, as summer 24 gas dropped 0.6% to 141.80p/th, whereas winter 24 gas increased 0.7% to 154.00p/th.  All seasonal power contracts declined this week, down on average by 3.5%, as summer 24 power decreased 3.6% to £119.00/MWh, and winter 24 fell 2.5% to £134.50/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 20.0% to £104.00/MWh, despite decreasing wind outturn forecasts for early next week, but taking direction from lowering NBP gas prices
  • November 23 power slipped 10.8% at £111.50/MWh and December 23 power decreased 7.2% to £123.00/MWh

Annual October contract

  • Q124 power moved 2.9% lower to £134.50/MWh.
  • The annual April 24 contract lost 3.1% to £126.75/MWh, 47.2% lower than the same time last year (£240.00/MWh)

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 3.7% to £104.40/MWh, following its baseload counterpart lower
  • November 23 peak power declined 8.1% at £129.00/MWh, and December 23 peak power decreased 3.6% to £139.50/MWh

Annual October contract

  • The annual April 24 peak power fell 1.6% to £136.25/MWh
  • This is 47.8% lower than the same time last year (261.25/MWh)

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 3.5%
  • Summer 24 power decreased 3.6% to £119.00/MWh, while winter 24 fell 2.5% to £134.50/MWh

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 1.5% on average
  • Summer 24 and winter 24 peak power dropped 1.3% and 1.7% respectively, falling to £122.75/MWh and £149.75/MWh

Commodity price movements

Oil and coal

  • Contrary to the price adjustment registered across the previous reporting period, Brent crude experienced an upward movement this week, rising 4.1% to $91.43/bl
  • This bullish sentiment was supported amid concerns around a potential regional escalation of the Israel-Hamas conflict, acting to tighten global supply, with further support arising from a decrease in US crude stocks
  • Further price increases were provided through recent policy adjustments across China, supporting economic growth across the country
  • However, higher price gains were limited as the U.S. agreed to ease sanctions on Venezuela’s oil industry, with an approximate 25% increase in production from the country, aiding in supporting global supply levels
  • Through the remainder of 2023, price gains are likely as Chinese economic growth is set to resurge and uncertainty surrounding the Israel-Hamas conflict continues to grow, potentially impacting oil producing regions across the Middle East

Carbon (UK and EU ETS)

  • Both EU and UK ETS schemes registered losses across this reporting period, as EU ETS carbon dropped 1.9% to average €82.50/t, and UK ETS carbon fell 0.6% to £47.42/t
  • However, UK ETS carbon started the reporting period at £52.55/t, the highest seen since July, as wind generation remained below-average acting to tighten system margins
  • Wind generation rose notably in the latter half of the week, leading to day-on-day losses across UK ETS prices, ending the week at £42.50/t
  • The average price forecast for UK carbon allowances out to 2030 has been significantly reduced following bearish demand pressure and softening policy ambition from market reform efforts acting to bolster supply over the coming years
  • The outlook for EU carbon prices has been reduced until 2030 by some market forecasts, as stagnant industrial productivity, reduced demand from the power sector, and increased EUA auction supply provide a bearish sentiment

Wholesale price snapshot – Friday-on Friday

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