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Energy Wholesale Market Review, 2 August 2019

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This week, gas contracts experienced mixed movements, while all baseload power contracts rose. Day-ahead gas was up 9.3% at 30.5p/th, supported by maintenance reducing flows from UKCS. This was despite the gas system ending the week oversupplied by 24mcm/d, due to the rerouting of Norwegian gas to the UK. Seasonal gas contract movements were mixed, moving just 0.1% higher on average week-on-week. While winter 19, summer 21 and winter 21 were all slightly higher, both summer 20 and winter 20 gas moved lower. Day-ahead power prices were supported by weaker wind generation during the week, coupled with the rise in day-ahead gas. This saw day-ahead power up 4.3% to end the week at £42.8/MWh. Seasonal baseload power contracts reversed the previous week’s losses, up 1.0% on average. Winter 19 power gained 0.5% to £56.7/MWh, an increase of 5.1% from the same time last month (£54.0/MWh). Brent crude oil was up just 0.2% to average $63.9/bl. Oil prices rose above $65.0/bl on 31 July following news of another weekly decline in US crude stocks, dropping 8.5mn barrels the previous week. API 2 coal prices reversed the previous week’s gains, dropping 2.9% to average $68.1/t, pressured by weaker demand. EU ETS carbon prices averaged €28.7/t, down 1.7% from the previous week amid lower demand for allowances due to a drop in conventional-fired power generation.

Baseload electricity
The day-ahead contract continued higher, up 4.3% to £42.8/MWh. Prices were supported by periods of lower wind generation last week, whilst higher day-ahead gas prices also lifted prices. September and October 19 power were up 7.4% and 3.6% to £44.2/MWh and £46.6/MWh respectively.		Annual October 19 power increased by 0.6% week-on-week to £53.7/MWh. The contract is 5.7% higher than the same time last month (£50.8/MWh), and 1.8% above the same time last year (£52.7/MWh).
Forward curve comparison		Annual October Contract
Peak electricity
Day-ahead peak power was up 6.6% to £46.0/MWh, £3.2/MWh above its baseload counterpart. Day-ahead peak power is 29.5% lower than the same time last year when it was £65.3/MWh. September and October 19 peak power increased 6.6% and 3.4% to £47.3/MWh and £51.3/MWh respectively.		Annual October 19 peak power was 0.2% higher at £59.1/MWh, remaining £5.4/MWh above its baseload power counterpart. The contract is 5.1% above its value this time last month (£56.3/MWh), and 0.5% higher than the same time last year when it was £58.9/MWh.
Forward curve comparison		Annual October contract
Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal baseload power contracts reversed the previous week’s losses, rising 1.0% on average. Winter 19 power gained 0.5% to £56.7/MWh. Summer 20 power was 0.7% higher at £50.7/MWh.		Seasonal peak power contracts also reversed the previous week’s decline, up by 1.1% on average. Winter 19 peak power rose 0.3% to £63.3/MWh.
Commodity price movements
Oil and Coal		Carbon
Brent crude oil was up just 0.2% to average $63.9/bl. Oil prices rose above $65.0/bl on 31 July following news of another weekly decline in US crude stocks, dropping 8.5mn barrels the previous week. However, prices dropped to $60.1/bl on 1 August following a statement from US President Donald Trump that he would impose a 10% tariff on an additional $300bn of Chinese goods after another round of unsuccessful trade talks ended on 31 July. API 2 coal prices reversed the previous week’s gains, dropping 2.9% to average $68.1/t. Coal prices have been pressured by weaker demand following the end of the previous week’s heatwave, which saw a pickup in conventional plant generation amid higher demand and a drop in wind and nuclear generation.		EU ETS carbon prices averaged €28.7/t, down 1.7% from the previous week. Carbon prices fell following the end of the previous week’s heatwave which saw a pickup in conventional power generation, and therefore resulted in higher demand for EUAs. Despite the weekly average decline, carbon ended the week above €29/t, as auction volumes halved this month. Brexit remains a concern for market participants, with some traders expecting a no-deal Brexit to wipe €10/t off the current price of EUAs. With the UK parliament currently in recess until 3 September, Brexit will likely not be a key influence in the price of carbon this month.
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