Energy Wholesale Market Review – 27 October 2023

Headlines

Predominantly bearish gas price movements continued this week – with consistent losses seen across most tracked contracts, a likely consequence of the continued strong EU gas storage levels, at approximately 99% full at the time of writing. However, day-ahead gas was one exception to this bearish trend, rising 4.3% to 118.95p/th, despite falling demand forecasts and rising wind outturn projections, lowering gas-for-power demand. November 23 gas was down 0.2% at 128.00p/th, and December 23 gas decreased 3.8% to 139.50p/th. Most seasonal gas contracts declined last week, down by 1.8% on average, as both summer 24 and winter 24 gas dropped 4.4% and 2.6% respectively, subsiding to 135.50p/th and 150.00p/th, whereas summer 26 gas rose 0.4% to 93.33p/th. Opposing its gas counterpart, Day-ahead power fell 8.7% to £95/MWh, finding bearish support from increased wind generation levels, further reducing gas-for-power demand. All seasonal power contracts declined this week, down on average by 5.2%, as summer 24 power decreased 6.7% to £111.00/MWh, and winter 24 fell 4.6% to £128.25/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 8.7% to £95.00/MWh, finding bearish support from its gas counterpart, and increased wind generation levels, reducing gas-for-power demand
  • November 23 power slipped 4.9% at £106.00/MWh and December 23 power decreased 6.1% to £115.50/MWh

Annual October contract

  • Q124 power moved 4.8% lower to £128.00/MWh
  • The annual April 24 contract lost 5.6% to £119.63/MWh, 49.1% lower than the same time last year (£235.00/MWh)

Peak electricity

Forward curve comparison

  • Day-ahead peak power was up 1.5% to £106.00/MWh, opposing its baseload counterpart
  • November 23 peak power declined 6.0% at £121.25/MWh, and December 23 peak power decreased 5.6% to £131.7/MWh

Annual October contract

  • The annual April 24 peak power fell 5.6% to £128.68/MWh
  • This is 47.5% lower than the same time last year (245.25/MWh)

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 5.2%
  • Summer 24 power decreased 6.7% to £111.00/MWh, and winter 24 fell 4.6% to £128.25/MWh

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 5.7% on average
  • Summer 24 and winter 24 peak power dropped 7.6% and 3.9% respectively, falling to £113.40/MWh and £143.95/MWh

Commodity price movements

Oil and coal

  • Contrary to the sentiment experienced during the last reporting period, Brent crude oil registered an overall bearish trend, resulting in a 1.6% loss week-on-week to average $89.98/bl
  • As focus on the Middle East shifts to intensifying diplomatic efforts, with trader confidence in the potential containment of the Israel-Hamas conflict has aided in easing prices
  • Similarly, economic outlooks released in GB, Germany and other major European economies highlight lower trending demand levels
  • The outlook for oil prices remains heavily dependent on the Israel-Hamas conflict, and as it has the potential to grow into the future – prices remain sensitive against any indication of further tightening of supplies across the Middle East oil producing region
  • As such, it remains a volatile period for Brent crude, impacted strongly by current geopolitical affairs

Carbon (UK and EU ETS)

  • Despite wind generation levels registering week-on-week losses, acting to increase reliance on more expensive forms of power generation, the trend of decreasing prices continued this week
  • Both ETS schemes registered losses week-on-week as the EU ETS fell 2.8% to average €89.98/t, and the UK ETS dropped 14.9% down to £40.36/t
  • Prices dropped sharply as plunging gas prices triggered renewed selling of carbon allowances. The UK ETS recorded a price of €38.30/t on 27 October – reaching a monthly low after establishing a downward trend following one of the most bearish UKA auctions of the year last week
  • The EU ETS experienced its lowest price since January 2023 on 26 October, at €79.65/t due to low demand outlook
  • The cumulative surplus in the UK ETS will continue to grow through 2026, acting to limit the upwards momentum in the market. Due to this, the UK ETS is likely to remain below the EU ETS price without further market reform

Wholesale price snapshot – Friday-on Friday

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