Energy Wholesale Market Review – 22 September 2023

Headlines

This week, gas prices saw bullish sentiment across shorter-term contracts, despite improving pipeline supply as major maintenance across Norwegian gas fields subsides, and a resolution being reached at LNG facilities in Australia – ending industrial strike action. Upwards price trends were showcased as day-ahead gas rose 18.3% to 101.00p/th, amid an undersupplied GB system in periods across the reporting week. Conversely, day-ahead power dropped 11.8% to £71.00/MWh, opposing the rising momentum seen in its equivalent gas contract, despite low wind generation forecasts typically tightening system margins. October 23 gas was up 16.9% at 102.00p/th, and November 23 gas increased 3.0% to 112.20p/th.  Overall seasonal gas contracts remained relatively unchanged this week, as the 2.1% gain to winter 23 gas (124.00p/th) was offset – with summer 24 and winter 24 gas decreasing 0.4% and 0.7%, falling to 125.50p/th and 141.00p/th respectively and summer 25 and winter 25 also registering losses. The majority of seasonal power contracts traded lower this week, down on average by 1.0%, as winter 23 and summer 24 fell 0.2% and 1.9% respectively, dropping to £111.50/MWh and £106.00/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 11.8% to £71.00/MWh, despite decreased wind generation projections for Monday acting to ordinarily tighten system margins, in tandem with gains shown from its gas counterpart.
  • Similarly, October 23 power climbed 8.8% at £90.00/MWh whereas November 23 power decreased 0.5% to £103.00/MWh.

Annual October contract

  • Q423 power moved 1.5% higher to £102.50/MWh.
  • The annual October 23 contract lost 1.0% to £108.75/MWh, 64.8% lower than the same time last year (£309.00/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was up 18.7% to £90.50/MWh, opposing the trend registered across its baseload counterpart
  • October 23 peak power gained 4.4% at £99.39/MWh, and November 23 peak power decreased 3.0% to £125.65/MWh.

Annual October contract

  • The annual October 23 peak power fell 2.4% to £122.00/MWh
  • This is 72.8% lower than the same time last year (448.25/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • Most seasonal power contracts declined this week, down on average by 1.0%.
  • Winter 23 power decreased 0.2% to £111.50/MWh, while summer 24 fell 1.9% to £106.00/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 2.4% on average.
  • Winter 23 and summer 24 peak power dropped 2.2% and 2.6% respectively, falling to £131.75/MWh and £112.25/MWh.

Commodity price movements

Oil and coal

  • Brent crude reached a 10-month high of $94.95/bl on 19 September with multiple bullish factors impacting the commodity.
  • Brent crude registered gains when compared to the previous reporting period, rising 1.6% to $93.74/bl.
  • Upwards price movements were influenced by decreasing US shale output, prompting further concern over a growing supply deficit due to extended production cuts from Russia and Saudi Arabia, and the Russian announcement surrounding a ban on most fuel exports.
  • Positive price movements were diminished ahead of the US Federal Reserve releasing a decision surrounding interest rates.
  • Volatility in Brent crude oil is likely to continue into the foreseeable future, as it remains tied to volatile situations around the world such as Chinese economic recovery.

Carbon (UK and EU ETS)

  • The UK ETS experienced its lowest price since the scheme opened in May 2021, as the disparity between scheme prices remains at an all-time high, due to recent policy adjustments across both schemes.
  • UK ETS prices fell to a record low of £34.25/t on 22 September, averaging £36.23/t across the week, representing a 9.0% drop.
  • On the back of continued high wind outturn and seasonally above-average temperatures, last week presented itself to be another bearish period for UK carbon markets – marking a third consecutive week of losses across the scheme.
  • Similarly, EU ETS carbon saw its lowest value since January, with prices dropping to €80.75/t on 19 September, registering minimal gains to average €82.26/t.
  • Over the coming weeks, carbon prices across both schemes will continue to be heavily correlated to the amount of wind generation across both geographies.

Wholesale price snapshot – Friday-on Friday

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