Energy Wholesale Market Review, 18 February 2022

Headlines

This week has seen the introduction of more bearish movements across most gas and power contracts, with more pronounced losses seen in near-term contracts while smaller losses were observed further along the forward curves. Day-ahead gas fell 4.1% to 170.00p/th, following periods of stronger Norwegian imports into GB, softening the general trend of tight gas supply margins this winter. Further pressure came from news that Russian-Ukranian tensions eased slightly, reducing future gas supply concerns. Day-ahead power followed lower, dropping 16.2% to £132.0MWh, exacerbated by strong wind output as storms Dudley and Eunice swept across much of the UK. Furthermore, March 22 gas was down 4.8% at 171.84p/th, and April 22 gas decreased 4.2% to 172.31p/th. Most seasonal gas contracts declined this week too, down by 0.9% on average, with both summer 22 and winter 22 gas dropping 3.8% and 3.5% respectively, to 172.57p/th and 181.41p/th. Seasonal power contracts also declined this week, following their seasonal gas counterparts down. Seasonal power contracts fell on average by 2.1%, with summer 22 power lowering 3.4% to £166.20/MWh.

Baseload electricity
  • Day-ahead power fell 16.2% to £132.0/MWh, following strong wind output during the week, aided by storms Dudley and Eunice making landfall across the UK.
  • March 22 power slipped 1.8% to £167.0/MWh and April 22 power decreased 4.3% to £167.5/MWh.
  • Q222 power moved 2.6% lower to £168.0/MWh.
  • The annual April 22 contract lost 2.2% to £172.6/MWh, 231.9% higher than the same time last year (£52.0/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was down 4.8% to £160.00/MWh, following baseload power lower.
  • March 22 peak power declined 3.3% at £193.5/MWh, and April 22 peak power decreased 12.8% to £170/MWh.
  • The annual April 22 peak power contract rose 7.1% to £194.63/MWh.
  • This is 232.6% higher than the same time last year (58.51/MWh).

Forward curve comparison

 

Annual April contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

  • All seasonal power contracts declined this week, down on average by 2.1%.
  • Summer 22 power decreased 3.4% to £166.20/MWh, while winter 22 fell 1.1% to £179.00/MWh.
  • Seasonal peak power contracts were up 4.0% on average this week.
  • Summer 22 peak power dropped 2.4% to £180.00/MWh, while winter 22 peak power increased 16.9% to £209.25/MWh.
Commodity price movements

Oil and Coal

 

Carbon

  • Brent crude oil prices recorded further gains this week, a consistent trend with much of the start of 2022. Prices averaged $93.20/bl this week, 2.1% higher than the previous week. This also included a fresh seven-year high on Monday 14 Feb at $94.48/bl.
  • The sensitive political landscape, at the week’s start more specifically, drove prices higher with news possible Russian crude oil sanctions could be imposed should tensions with the Ukraine and other EU member states escalate. As the week progressed, the severity of this situation subsided slightly, and prices generally curtailed for the remainder of the week as a result.
  • Carbon prices saw a collective decline from the week prior. The UK ETS dropped 1.6% to average £84.12/t, while the EU ETS fell further still, down 5.5% to average €89.05/t.
  • Both the UK and Continental Europe have been sharing similar weather trends, namely milder weather and strong winds with a large weather front bringing stormy conditions from the west.
  • Consequently, these stronger wind output levels and higher temperatures have placed less pressure on gas fired generation to meet demand, softening carbon prices on average in the week as a result.
Wholesale price snapshot 

 

Posted by TEAM on 21 February 2022