Energy Wholesale Market Review – 22 April 2024

Headlines

Across the week ending 19 April, tracked gas and power contracts predominantly registered gains, however some of those further out on the forward curve saw losses. Day-ahead gas rose 6.3% to 77.05p/th, due to higher gas-for-power forecasts following lower wind generation projections and below-average temperatures. Likewise, day-ahead power rose 189.8% to £76.81/MWh, returning to a more typical price after the notably high wind generation over the past two weeks, finding support from the movements registered across its gas counterpart, and the aforementioned lower wind generation forecasts, which will increase the reliance on more expensive forms of power generation. Moreover, May 24 gas was up 2.7% at 76.95p/th, and June 24 gas increased 2.1% to 75.85p/th. Most seasonal gas contracts lowered last week, however a 39.9% increase to the winter 26 contract, rising to 113.28p/th, led to overall growth across seasonal contracts, up 6.5% on average. Similarly, most seasonal power contracts declined this week, down on average by 0.6%, as summer 25 fell 1.3% to £73.50/MWh, and winter 25 dropped 1.2% to £82.50/MWh. Brent crude oil and the UK and EU carbon markets continue to be impacted by global geopolitical events, and as such it is expected prices will remain volatile in the week ahead.

Baseload electricity

Forward curve comparison

  • Day-ahead power prices on the 19 April rose 189.8% to £76.81/MWh, finding support from notably reduced wind generation levels for 22 April, acting to tighten system margins
  • Moreover, May 24 power climbed 2.0% to £65.00/MWh and June 24 power increased 0.4% to £66.25/MWh

Annual October contract

  • Q324 power moved 0.7% higher to £69.00/MWh.
  • However, the annual October 24 contract fell 0.3% to £78.35/MWh, 38.1% lower than the same time last year (£126.50/MWh)

Peak electricity

Forward curve comparison

  • Day-ahead peak power was up 16.4% to £73.00/MWh, finding influence from the movement registered across its baseload counterpart
  • May 24 peak power gained 6.7% to £70.50/MWh, and June 24 peak power increased 5.1% to £71.75/MWh

Annual October contract

  • The annual October 24 peak power rose 5.1% to £90.02/MWh
  • However, this is 51.2% lower than the same time last year (£184.50/MWh)

Seasonal power prices

Seasonal baseload power contracts

  • Most seasonal power contracts declined this week, down on average by 0.6%
  • Summer 25 power fell 1.3% to £73.50/MWh, and winter 25 lost 1.2% to £82.50/MWh

Seasonal peak power curve

  • All seasonal peak power contracts boosted this week, up 6.3% on average
  • Winter 24 and summer 25 peak power increased 7.0% and 5.6% respectively, rising to £96.05/MWh and £78.50/MWh

Commodity price movements

Oil and coal

  • Across the reporting period, Brent crude opposed recent bullish adjustments, falling 1.9% week-on-week to average $88.66/bl despite news of an attack on Iran boosting supply concerns, due to its status as one of the largest oil exporters on the global market
  • Likewise, news of the US reimposing sanctions on Venezuela’s oil and gas exports supported the bullish market sentiment
  • However, the price losses were the result of Brent crude finding bearish influence from a rise in US crude inventories, increasing by 2.7 million barrels in the week ending April 12, and concerns surrounding Chinese demand following weak economic data released from the country
  • Elsewhere, Goldman Sachs has increased its Brent crude forecast for the second half of 2024 to $86.00/bl
  • This is $1.00/bl higher than the previous forecast, citing reduced US supply and geopolitical factors as price influencers

Carbon (UK and EU ETS)

  • This week saw the continuation of recent upwards movements, with both EU ETS and UK ETS carbon prices rising, up 13.2% and 2.3% to €70.83/t and £36.13/t respectively. Prices found support from colder-than-average temperatures and lower wind generation across the UK and EU
  • Likewise, EU ETS prices remain strongly linked to Dutch TTF prices, with gas playing a role in shaping carbon prices. Because of this, the rising geopolitical tensions in the Middle East throughout the week led to higher prices across the EU ETS
  • Stronger gains were limited because coal prices were up, which limits EUA demand as the higher prices act to weaken profit margins for coal plants and allowance demand in turn
  • UK ETS prices are expected to remain bullish in the short-term, finding support from notably reduced wind generation levels in the week ahead, and below-average temperatures

Wholesale price snapshot – Friday-on Friday

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