Energy Wholesale Market Review – 25 August 2023

Headlines

This week, we observed mixed price movements. Largely, all gas contracts recorded losses, with day-ahead being the exception – rising 4.9% to 86.00p/th, following lower day-ahead wind outturn projections boosting gas-for-power demand forecasts. Similarly, day-ahead power rose 5.7% to £93.00/MWh, finding support from its gas counterpart, however gains were subdued by reduced day-ahead demand forecasts. . September 23 gas was down 6.5% at 86.00p/th, and October 23 gas decreased 11.8% to 92.60p/th, with all seasonal gas contracts declining last week, by an average of 8.4%. This arose due to the announcement in the latter half of the week outlining that strike action at Australian LNG plants would be averted – providing stability to longer-term contracts. Winter 23 and summer 24 gas dropped 7.4% and 5.9% respectively, subsiding to 126.00p/th and 128.00p/th. Most seasonal power contracts recorded growth this week, up on average by 1.0%, as winter 23 power decreased 2.9% to £120.85/MWh, summer 24 fell 2.8% to £113.25/MWh, whereas summer 25 rose 12.5% to £108.00/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power rose 5.7% to £93.00/MWh, following its gas counterpart, with falling wind generation acting to tighten system margins
  • September 23 power slipped 4.0% to £85.00/MWh and October 23 power decreased 7.1% to £92.00/MWh

Annual October contract

  • Q423 power moved 5.1% lower to £111.00/MWh.
  • The annual October 23 contract lost 2.9% to £117.05/MWh, 75.0% lower than the same time last year (£467.50/MWh)

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 2.2% to £87.50/MWh, opposing its baseload counterpart which experienced gains
  • September 23 peak power declined 8.7% at £87.30/MWh, and October 23 peak power decreased 8.8% to £99.43/MWh.

Annual October contract

  • The annual October 23 peak power rose 3.3% to £130.63/MWh
  • This is 80.2% lower than the same time last year (660.01/MWh)

Seasonal power prices

Seasonal baseload power contracts

  • Most individual seasonal power contracts fell this week, however, seasonal power contracts as a whole rose by 1.0% overall due to summer 25 growing 12.5%.
  • Winter 23 power decreased 2.9% to £120.85/MWh, and summer 24 fell 2.8% to £113.25/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 3.3% on average.
  • Winter 23 and summer 24 peak power dropped 3.4% and 3.3% respectively, falling to £142.25/MWh and £119.00/MWh

Commodity price movements

Oil and coal

  • Brent crude continued to experience the bearish price adjustment started during the last reporting period, registering a drop of 1.0% to average $84.17/bl
  • The commodity registered a loss amid concern over further U.S. interest rate increases acting against tightening global supply. Higher borrowing costs can impede economic growth and in turn reduce overall demand for oil
  • This sentiment was strengthened after poor Chinese post-COVID economic performance dampens demand
  • However, it is important to highlight the impact of OPEC+ supply cuts as global supply remains constricted, limiting losses registered
  • It is anticipated that Saudi Arabia will extend the one million barrels per day supply cut into October after the weakness experienced across the oil market in the first half of 2023

Carbon (UK and EU ETS)

  • Opposing the recent strong bearish trend, UK ETS carbon prices recorded a notable 17.1% gain to average £47.86/t – the highest level in four weeks.
  • This follows bullish energy prices, arising due to uncertainty surrounding Australian LNG strikes in the first half of the reporting period.
  • Despite this, gains are currently being limited by industrial demand trending below average
  • EU ETS carbon also registered a week-on-week gain, although notably lower than UK ETS carbon, experiencing a 0.1% rise to average €87.81/t, finding notable bearish support in the latter half of the reporting period due to announcements that the strike action at Australian LNG facilities had been averted.
  • The disparity between UK ETS and EU ETS carbon is anticipated to shrink as the UK Emissions Trading System Authority is set to reform the scheme next year to include new sectors in 2026 – tightening limits on CO2 pollution

Wholesale price snapshot – Friday-on Friday

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