Energy Wholesale Market Review – 28 July 2023

Headlines

It was a bearish week for gas and power contracts this week, continuing the trend of decreasing wholesale prices observed across much of 2023. Day-ahead gas fell 10.5% to 64.00p/th, following periods of above-average temperature during the week and buoyed by reduced maintenance works across the Norwegian Continental Shelf, bolstering flows into GB from Norway. Day-ahead power dropped 16.7% to £70.00/MWh, taking direction from losses made in near-term gas markets and increased wind output during the week – loosening system margins. August 23 gas was down 11.1% at 65.40p/th, and September 23 gas decreased 11.8% to 67.50p/th. All seasonal gas contracts fell this week, down by 6.5% on average, with winter 23 and summer 24 gas falling 9.2% and 7.2%, to 116.70p/th and 122.50p/th respectively. All seasonal power contracts traded lower this week, down on average by 5.3%. Winter 23 and summer 24 power went down 7.0% and 6.1% respectively, falling to £113.50/MWh and £108.00/MWh. Brent crude oil rebounded this week, rising from losses seen in the week prior. Subsequently, prices were 4.6% higher at $83.06/bl. The EU ETS registered gains this week, up 2.8% to €90.86/t, however the UK ETS opposed this bullish sentiment, down 2.2% to £47.98/t.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 16.7% to £70.00/MWh, following its gas counterpart, with further losses supported by strong wind outturn forecasts for Monday.
  • August 23 power slipped 9.1% to £70.00/MWh and September 23 power decreased 8.1% to £77.00/MWh.

Annual October contract

  • Q423 power moved 7.8% lower to £106.00/MWh.
  • The annual October 23 contract lost 6.5% to £110.75/MWh, 56.0% lower than the same time last year (£251.50/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 0.8% to £71.45/MWh, following its baseload counterpart lower.
  • August 23 peak power declined 2.9% at £77.20/MWh, and September 23 peak power decreased 1.8% to £92.30/MWh

Annual April contract

  • The annual October 23 peak power rose 1.1% to £133.30/MWh.
  • This is 47.4% lower than the same time last year (253.50/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 5.3%
  • Winter 23 power decreased 7.0% to £113.50/MWh, while summer 24 fell 6.1% to £108.00/MWh.

Seasonal baseload power curve

  • All Seasonal peak power contracts declined this week, down 1.1% on average.
  • Winter 23 and summer 24 peak power dropped 1.5% and 0.7% respectively, falling to £144.40/MWh and £122.20/MWh

Commodity price movements

Oil and coal

  • Brent crude registered an upwards price movement across the reporting period boosting 4.6% to average $83.06/bl, following restricted global supply, increased investor optimism, and brightening outlooks surrounding Chinese demand.
  • However, U.S. crude inventories falling less-than-anticipated, coupled with an increase to interest rates from the Federal Reserve prevented further gains to brent crude across the week.
  • Bolstered Chinese demand projections were the result of the announcements from the Chinese government outlining pledges to boost economic growth.
  • Oil prices are expected to climb in the future, with Goldman Sachs anticipating record demand, raising their price forecast to $86 per barrel by the end of 2023

Carbon (UK and EU ETS)

  • The disparity between the UK and EU ETS schemes continues to widen, with the UK ETS falling to historic lows.
  • The EU ETS rose 2.8% to average €90.86/t, and the UK ETS dropped 2.2% to average £47.98/t
  • UK ETS prices fell to a two-year low of £47.25/t on Friday – finding support from lowering gas prices. In contrast, EU ETS carbon reached a one-month high of €92.60/t on Wednesday.
  • Prices for the EU ETS scheme were supported by strong demand ahead of the annual drop in auction supply in August, in tandem with bolstered demand for cooling appliances amid an atypical heatwave across southern Europe

Wholesale price snapshot – Friday-on Friday

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