Energy Wholesale Market Review – 7 July 2023

Headlines

Wholesale gas and power prices were relatively mixed throughout the week, with losses recorded across shorter-term contracts, day-ahead baseload power being the exception. Front-month contracts across gas and power recorded losses, buoyed by strong EU gas storage levels and above-average temperatures reducing demand. This resulted in the 7.0% drop experienced across day-ahead gas, falling to 79.00p/th. However, day-ahead power diverted from the trend set by its gas counterpart and registered a 34.9% gain week-on-week to £85.00/MWh, supported by forecasts of reduced wind generation into next week. Elsewhere, August 23 gas was down 7.9% at 80.50p/th, and September 23 gas decreased 9.7% to 86.50p/th. All seasonal gas contracts increased this week though, up by 3.3% on average – while both winter 23 and summer 24 gas increased 1.1% and 3.2% respectively, lifting to 132.50p/th and 130.50p/th. Like gas, the majority of seasonal power contracts saw gains up on average by 1.2% as summer 24 expanded 2.2% to £116.00/MWh, and winter 24 grew 1.1% to £133.00/MWh. Gains observed further into the forward curve are indicative of the level of risk being priced into future delivery with energy supply uncertainties remaining a prominent lever.

Baseload electricity

Forward curve comparison

  • Day-ahead power rose 34.9% to £85.00/MWh, following forecasts of increasing demand in tandem with falling wind outturn projections.
  • August 23 power slipped 7.6% at £85.00/MWh and September 23 power decreased 10.7% to £91.00/MWh.

Annual October contract

  • Q423 power moved 27.7% higher to £120.00/MWh.
  • The annual October 23 contract rose 0.9% to £122.00/MWh, 45.5% lower than the same time last year (£223.75/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 3.7% to £87.9/MWh, despite its baseload counterpart registering gains
  • Similarly, August 23 peak power declined 7.1% at £88.75/MWh, and September 23 peak power decreased 9.9% to £103.5/MWh

Annual April contract

  • The annual October 23 peak power rose 0.3% to £140.88/MWh
  • However, this is 57.2% lower than the same time last year (329/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • Most seasonal power contracts boosted this week, up on average by 1.2%.
  • Winter 23 power decreased 0.2% to £128.00/MWh, while summer 24 expanded 2.2% to £116.00/MWh.

Seasonal baseload power curve

  • Most seasonal peak power contracts boosted this week, up 0.3% on average.
  • Winter 23 gas remained static at £160.75/MWh, summer 24 peak power increased 0.6% to £121.00/MWh, and winter 24 grew 1.9% to £160.25/MWh

Commodity price movements

Oil and coal

  • Contrary to the price adjustment registered across the previous reporting period, Brent Crude experienced an upward movement this week, rising 3.4% to $76.20/bl
  • This bullish sentiment was supported by OPEC+ price cuts, acting to tighten global supply, with further support arising from news that stated U.S. stocks had hit their lowest level since the start of 2023.
  • Higher price gains were limited amid growing concern of another U.S. interest rate hike in tandem with forecasts of a slowing global economy – especially from China which is experiencing weaker-than-anticipated growth.
  • Ahead of the OPEC demand forecast for 2024 scheduled for 13 July, it is anticipated a positive outlook on oil demand growth will remain in place – with a notably more bullish forecast expected when compared to the IEA.

Carbon (UK and EU ETS)

  • The EU ETS continues its trend of week-on-week decreases, registering a 1.2% drop to average €87.01/t, as renewable generation across Europe rose. However, the UK ETS registered gains from the last reporting period – a 3.8% increase to £55.00/t
  • This came following an announcement from the UK ETS Authority surrounding a package of reforms that sent prices upward, registering a two-month high on the 3 July at £60.00/t, before prices fell as the week progressed.
  • Lower prices are expected as lower demand as a result of economic slowdown impacts demand levels. A degree of volatility is baked into this as carbon markets take influence from the trend across gas markets, which may see price gains if winter 23/24 is colder than anticipated

Wholesale price snapshot – Friday-on Friday

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