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Energy Wholesale Market Review, 1 March 2019

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This week, wholesale power and gas contracts experienced mixed movements, as most contracts beyond the month-ahead rose week-on-week. Day-ahead power and gas contracts have fallen week-on-week amid record high winter temperatures and comfortable gas supplies, despite low wind generation during the week. Nearly all baseload power contracts rose week-on-week. Day-ahead power was an exception, falling 2.2% to end the week at £48.0/MWh, amid forecasts of high wind generation next week. The contract followed its gas counterpart lower early in the week, hitting a fresh eight-month low of £47.3/MWh on 25 February despite low wind generation forecast the following day. Seasonal power contracts reversed the previous week’s losses, gaining 1.6% on average. Both summer and winter 19 power rose 1.4% to £48.5/MWh and £58.4/MWh, respectively. Gas contracts experienced mixed movements. Near-term gas contracts out to Q219 fell week-on-week, whilst seasonal contracts beyond and including winter 19 rose. Near-term gas prices have been weighed on by comfortable gas supplies amid the arrival of several LNG tankers, record warm temperatures, and strong supplies from UKCS and Norway. Day-ahead gas dropped 1.2% to end the week at 44.2p/th. The contract dropped to a fresh 17-month low of 43.9p/th on 25 February. Seasonal gas contracts rose 0.3% on average, with all contracts except summer 19 increasing week-on-week. Summer 19 gas was unchanged at 44.7p/th.

Baseload electricity
Day-ahead power fell 2.2% to £48.0/MWh. The contract hit a fresh eight-month low of £47.3/MWh on 25 February. April 19 power was unchanged at £47.9/MWh, whilst May 19 power lifted 0.6% to £47.5/MWh.		Annual April 19 power rose 1.4% to £53.5/MWh. The contract is 4.2% below the same time last month when it was £55.8/MWh, but 23.3% above the same time last year when it was £43.4/MWh.
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power fell 3.6% to £51.0/MWh, just £3.0/MWh above its baseload counterpart. Day-ahead peak power is 38.2% lower than the same time last year when it was £82.5/MWh. April 19 peak power slipped 0.1% to £50.6/MWh, £2.7/MWh above its baseload counterpart.		Annual April 19 peak power increased 3.3% to £58.9/MWh, £5.4/MWh above its baseload power counterpart. The contract was 3.9% below its price last month (£61.2/MWh), but 22.9% higher than its value last year (£47.9/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal power contracts reversed the previous week’s losses, gaining 1.6% on average. Both summer and winter 19 power rose 1.4% to £48.5/MWh and £58.4/MWh, respectively.		All seasonal peak power contracts went up this week, increasing by 1.3% on average. The summer 19 peak contract was 1.3% higher at £52.4/MWh, £3.9/MWh above its baseload power counterpart.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil slipped 1.0% to average $66.0/bl. Oil prices fell from the previous week’s three-month high following tweets from US President Donald Trump, which said “Oil prices getting too high. OPEC, please relax and take it easy.” Although this resulted in a downturn in oil prices, Saudi Arabian Energy Minister Khalid al-Falih responded that the group were “taking it easy” and said “the 25 countries are taking a very slow and measured approach. […] we are interested in market stability first and foremost.” API 2 coal prices rose for a second consecutive week, up 1.9% to average $79.4/t. Coal ended the week at a three-week high of $80.8/t.		EU ETS carbon prices rose 1.8% to average €20.3/t. Within-day carbon prices had started the week at €18.5/t, the lowest since 6 December 2018, however prices recovered to end the week just below €22.0/t. Prices were supported last week by heavy buying from emitters ahead of the 30 April deadline to submit EUAs to cover last year’s emissions. Generally, carbon prices have been pressured by warmer weather reducing demand for conventional power generation, a fall in gas prices, uncertainty around the UK’s future carbon policy post-Brexit, and by news of Germany’s coal phaseout. As weather nears seasonal normal temperatures in March, demand for conventional power generation is expected to increase EUA buying across Europe.

Wholesale price snapshot