Energy Wholesale Market Review – 29 September 2023

Headlines

This week, gas and power prices saw bearish sentiment further along the forward curve, as uncertainty surrounding Australian LNG supply lowered following a resolution to strike action at the Wheatstone and Gorgon gas terminals, in tandem with strong EU gas storage levels providing a solid foundation for winter energy security. Similar bearish price trends were captured on short-term gas contracts as day-ahead gas fell 4.0% to 97.00p/th, amid bolstered Norwegian flows as maintenance works at select Norwegian gas fields ended. Conversely, day-ahead power rose 33.8% to £95.00/MWh, opposing the bearish momentum seen in its equivalent gas contract, amid lower wind generation forecasts for Monday acting to tighten system margins. October 23 gas was down 3.4% at 98.50p/th, and November 23 gas decreased 4.5% to 107.20p/th. Seasonal gas contracts reduced by an average of 4.9% this week, with winter 23 and summer 24 gas falling 5.3% and 6.8% respectively, subsiding to 117.45p/th and 117.00p/th. All seasonal power contracts traded lower this week, down on average by 3.8%, as both winter 23 and summer 24 declined 4.5% to £106.50/MWh and £101.25/MWh respectively.

Baseload electricity

Forward curve comparison

  • Day-ahead power rose 33.8% to £95.00/MWh, as lower wind generation forecasts for Monday tighten system margins.
  • Conversely, October 23 power slipped 4.2% at £86.25/MWh, and November 23 power decreased 4.4% to £98.50/MWh.

Annual October contract

  • Q423 power moved 3.9% lower to £98.50/MWh.
  • The annual October 23 contract lost 4.5% to £103.88/MWh, 67.3% lower than the same time last year (£317.50/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was up 2.8% to £93.00/MWh, following the trend registered across its baseload counterpart.
  • October 23 peak power declined 1.4% at £98.00/MWh, and November 23 peak power decreased 1.7% to £123.50/MWh.

Annual October contract

  • The annual October 23 peak power fell 4.3% to £116.75/MWh
  • This is 76.7% lower than the same time last year (500.25/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 3.8%.
  • Winter 23 power decreased 4.5% to £106.50/MWh, similarly summer 24 also fell 4.5% to £101.25/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 4.3% on average.
  • Winter 23 and summer 24 peak power dropped 4.5% and 4.2% respectively, falling to £126.00/MWh and £107.50/MWh.

Commodity price movements

Oil and coal

  • Brent crude prices lifted 0.9% last week to average $94.55/bl, continuing price gains seen in the previous week.
  • Oil prices continue to buoyed by the tight supply landscape.
  • News that OPEC+ supply cuts are set to last until the end of the year, and a temporary ban on Russian fuel exports supported prices this week.
  • Similarly, expectations of increased fuel demand in China stemming from the Golden Week Holiday period, and tight US supply also provided price support last week.
  • However, concerns over further Chinese demand for the remainder of the year acts as a bearish driver, limiting price gains recorded.

Carbon (UK and EU ETS)

  • The EU and UK ETS saw opposing price movements during this reporting period. The EU ETS rose 1.2% to average €83.20/t whilst the UK ETS lost 0.1% to average £36.19/t.
  • For the EU ETS, gains were underpinned by a strengthening link to gas prices, amid gas supply interruptions in the North Sea.
  • UKA prices opposed their European counterpart, following periods of increased renewable generation in the electricity mix, reducing the requirement for gas-fired stations to meet demand.
  • A transitional period will apply for EU CBAM from 1 October 2023 to 31 December 2025, with solely quarterly reporting obligations; from 2026 onward, purchasing CBAM certificates will be required.
  • The EU ETS will be extended in the aviation and maritime sectors; new ETS II will cover fuels for transportation and heating.

Wholesale price snapshot – Friday-on Friday

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