Energy Wholesale Market Review – 23 June 2023

Headlines

This week favoured a bearish outcome for gas and power prices in GB, both in the near-term and further along the forward curve – underpinned by strong EU gas storage levels easing uncertainty surrounding potential supply shocks this winter. Day-ahead gas fell 8.4% to 80.60p/th, following decreased gas-for-power demand as temperatures remain above-average – however losses were capped by multiple outages at Norwegian gas fields – stemming natural gas flows into GB. Day-ahead power fell 18.4% to £80.00/MWh, following the bearish momentum gained from its equivalent gas contract, despite periods of low wind output. July 23 gas was down 7.5% at 81.40p/th, and August 23 gas decreased 8.1% to 81.20p/th. All seasonal gas contracts declined last week, down by 2.3% on average, while both winter 23 and summer 24 gas dropped 1.5% and 1.6% respectively, subsiding to 130.00p/th and 124.00p/th. Similarly, seasonal power contracts followed their gas counterparts, down on average by 2.4%, as winter 23 power decreased 3.7% to £131.50/MWh, and summer 24 fell 2.6% to £113.00/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 18.4% to £80.00/MWh, as energy consumption for cooling appliances fell. However, losses were limited by recent low wind generation across the UK.
  • July 23 power slipped 7.5% at £92.00/MWh and August 23 power decreased 9.1% to £90.00/MWh

Annual October contract

  • Q323 power moved 8.0% lower to £92.00/MWh.
  • The annual October 23 contract lost 3.2% to £122.25/MWh, 30.3% lower than the same time last year (£175.50/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 18.2% to £90.75/MWh, following its baseload counterpart lower.
  • July 23 peak power declined 14.2% at £101.25/MWh, and August 23 peak power decreased 12.4% to £97.25/MWh.

Annual April contract

  • The annual October 23 peak power rose 5.2% to £145.50/MWh.
  • However, this is 43.6% lower than the same time last year (258.00/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 2.4%.
  • Winter 23 power decreased 3.7% to £131.50/MWh, while summer 24 fell 2.6% to £113.00/MWh

Seasonal baseload power curve

  • All seasonal peak power contracts declined this week, down 5.3% on average.
  • Winter 23 and summer 24 peak power dropped 4.5% and 6.1% respectively, falling to £168.00/MWh and £123.00/MWh.

Commodity price movements

Oil and coal

  • Opposing the trend experienced over the last reporting period, Brent crude registered a 2.1% gain week-on-week to average $75.68/bl
  • The bullish price trend arose from OPEC+ supply cuts, in tandem with surprise gains in U.S. crude inventories and expectations of further interest rate hikes from the U.S. Federal Reserve.
  • However, further price gains were limited by poor Chinese economic performance, a declining number of operating oil and gas rigs in the U.S., and a higher-than-expected rate hike from the Bank of England.
  • The OCBC Bank continues to maintain the forecast for Brent Crude Oil prices averaging $90/bl across 2023 – implying higher oil prices across the coming months.

Carbon (UK and EU ETS)

  • Continuing their week-on-week gains the EU ETS rose 1.5% to average €91.42/t, and the UK ETS grew 2.5% to average £57.84/t. This follows recent low wind generation across the UK – tightening system margins and bolstering the demand for other forms of power generation.
  • Throughout the week, Norwegian gas plant maintenance extensions triggered significant squeezes across natural gas markets – acting to support higher carbon prices.
  • As part of the EU’s “Fit for 55” package, the EU ETS will be extended to include emissions from buildings, road transport, and fuel from currently undefined sectors from 2027 onwards.

Wholesale price snapshot – Friday-on Friday

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