Energy Wholesale Market Review – 8 December 2023

Headlines

This week saw the continuation of bearish price movements across most gas and power wholesale contracts. Subsequently, we saw the majority of gas and power contracts drop week-on-week. Day-ahead gas fell 7.9% to 96.75p/th, as higher levels of wind generation on the system led to less demand for gas-fired assets, acting to outweigh the continuation of colder temperatures across the week. Likewise, day-ahead power fell 19.2% to £86.50/MWh, mirroring trends set from its gas equivalent contract and driven further by the aforementioned higher levels of wind generation acting to loosen system margins. Furthermore, January 24 gas was down 7.2% at 99.30p/th, and February 24 gas decreased 7.7% to 100.60p/th. All seasonal gas contracts saw losses this week, down by 4.1% on average, while both summer 24 and winter 24 gas decreased 6.3% and 5.0% respectively, falling to 97.50p/th and 113.25p/th. Like gas, all seasonal power contracts fell this week, down on average by 6.8%, as summer 24 power decreased 7.7% to £84.50/MWh, while winter 24 fell 6.5% to £101.50/MWh.

Baseload electricity

Forward curve comparison

  • Day-ahead power fell 19.2% to £86.50/MWh, with increased wind generation projections and falling consumption forecasts for Monday acting to loosen system margins.
  • January 24 power slipped 7.9% at £92.30/MWh and February 24 power decreased 8.7% to £94.00/MWh.

Annual October contract

  • Q124 power moved 1.5% higher to £101.50/MWh.
  • The annual April 24 contract lost 7.0% to £93.00/MWh, 61.6% lower than the same time last year (£242.50/MWh).

Peak electricity

Forward curve comparison

  • Day-ahead peak power was down 6.8% to £115.00/MWh, following its baseload counterpart lower.
  • January 24 peak power declined 7.3% at £113.21/MWh, and February 24 peak power decreased 7.0% to £117.81/MWh.

Annual October contract

  • The annual April 24 peak power dropped 5.9% to £105.25/MWh.
  • This is 59.5% lower than the same time last year (260.00/MWh).

Seasonal power prices

Seasonal baseload power contracts

  • All seasonal power contracts declined this week, down on average by 6.8%.
  • Summer 24 power decreased 7.7% to £84.50/MWh, while winter 24 fell 6.5% to £101.50/MWh.

Seasonal peak power curve

  • All Seasonal peak power contracts declined this week, down 6.0% on average.
  • Summer 24 and winter 24 peak power dropped 6.8% and 5.3% respectively, falling to £90.75/MWh and £119.75/MWh.

Commodity price movements

Oil and coal

  • Brent crude continued to register a downward movement across the last week, falling 4.6% week-on-week to average $77.76/bl.
  • This decrease can be mainly attributed to lower demand from the world’s largest crude importer, China, as the country experiences slower-than-anticipated economic growth.
  • Moreover, gains were stunted by record high US output levels acting to outweigh the impacts of OPEC+ supply cuts in part.
  • As a global commodity, oil will remain volatile as geopolitical events play out around the world. Prices are likely to remain stable in the near-term as reduced demand from China counterbalances the reduced supply from OPEC+ countries.
  • However, Russia has stated that OPEC+ could deliver more production cuts in the first quarter of 2024, if existing cuts have little impact on the oil market.

Carbon (UK and EU ETS)

  • Last week was once again a bearish week across the carbon markets, as higher levels of wind generation affected the amount of fossil fuelled power generation needed to meet demand, acting to offset the impact of below-average temperatures in the UK specifically.
  • EU ETS carbon dropped 3.7% to average €69.87/t, and UK ETS carbon fell 16.6% to average £35.49/t.
  • Prices continue to be supported by an upcoming closure of the December auctions over the Christmas period – running from 13 December 2023 to 10 January 2024 for the UK ETS, with the last auction date for the EU ETS happening on 18 December.
  • EU ETS carbon prices dropped to the lowest level seen since October 2022 on 7 December, at €69.00/t and UK ETS carbon prices dropped to the lowest level recorded since the inception of the scheme in 2021, at £33.15/t on 8 December.

Wholesale price snapshot – Friday-on Friday

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