Energy Wholesale Market Review – 24 June 2024

Headlines

Last week largely represented a more bearish period for wholesale gas and power contracts in GB, with some exceptions arising across seasonal gas prices. Subsequently, day-ahead gas fell 4.8% to 80.05p/th, weighed by elevated temperatures acting to limit gas-for-heating demand in tandem with increased Norwegian flows bolstering gas supply into the UK. Similarly, day-ahead power dropped 2.1% to £81.50/MWh, following the downward movements from its equivalent gas contract, coupled with elevated week-on-week wind generation. Similarly, July 24 gas was down 5.1% at 79.00p/th, and August 24 gas decreased 4.8% to 80.65p/th. All seasonal power contracts dropped last week, down on average by 0.7%, as winter 24 power decreased 0.8% to £87.75/MWh, while summer 25 fell 0.5% to £77.10/MWh. However, most seasonal gas contracts rose last week, up by 0.7% on average, with summer 25 and winter 25 gas rising 0.3% and 0.7% to 90.25p/th and 98.35p/th, respectively.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 2.1% to £81.50/MWh, following stronger levels of wind generation on the system acting to loosen system margins and ease gas-for-power demand.
  • Similarly, July 24 power slipped 10.2% at £72.25/MWh and August 24 power decreased 9.7% to £72.05/MWh.

Annual October contract

  • Q324 power moved 3.3% lower to £73.50/MWh.
  • The annual October 24 contract lost 0.7% to £82.43/MWh, 28.3% lower than the same time last year (£115.00/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 6.6% to £76.85/MWh, following its baseload counterpart lower.
  • July 24 peak power declined 6.8% to £75.00/MWh, and August 24 peak power decreased 2.5% to £77.75/MWh.

Annual October contract

  • The annual October 24 peak power fell 0.8% to £95.24/MWh.
  • This is 42.0% lower than the same time last year (164.25/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined last week, down on average by 0.7%.
  • Winter 24 power decreased 0.8% to £87.75/MWh, while summer 25 fell 0.5% to £77.10/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined last week, down 0.9% on average.
  • Winter 24 and summer 25 peak power dropped 0.5% and 1.4% respectively, falling to £102.28/MWh and £83.60/MWh.

Commodity price movements

Oil and coal

  • Brent Crude continued to experience gains rising 3.8% to average $85.13/bl, with hopes of increased demand due to the U.S. summer driving season outweighing weak Chinese economic data.
  • Further gains were supported by news that U.S. crude inventories have fallen by at least ~2.3mn barrels, likely indicating the start of peak summer demand, with EIA data showing U.S. oil demand also rose by 1.9mn barrels per day last week.
  • Moreover, security of supply concerns due to escalating conflicts in Europe and the Middle East acted to support Brent Crude prices, with prices reaching the highest level since April 2024 on 21 June at $85.90/bl, amid further drone strikes against Russian fuel depots limiting total production from the country.
  • However, stronger gains were limited following news that unemployment claims in the U.S. were down, which may lead the Federal Reserve to keep interest rates unchanged.

Carbon (UK and EU ETS)

  • The arrival of above-average temperatures across the UK led to the easing of gas prices, in turn easing UK ETS carbon prices. Moreover, UK ETS carbon prices found bearish influence from increased wind generation on the system, and in turn lower thermal output.
  • Similarly, losses were seen across EU ETS carbon following above-average temperatures across Europe during last week, which acted to decrease overall total power demand requirements..
  • However, gains were limited by a drop in coal prices across the week. This typically makes it more economical to generate power using coal-fired generation, a more expensive fuel source, in turn raising carbon prices.
  • The upcoming 30 June deadline for EU nations to distribute the 2024 free allocation of EUAs may impact EU ETS carbon prices in the week ahead, with the distribution of free allowances potentially limiting buying interest.

Wholesale price snapshot – Friday-on Friday

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