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Energy Wholesale Market Review, 2 November 2018

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This week, wholesale power and gas, and commodity markets experienced downwards movements, with day-ahead gas and power contracts both hitting 11-week lows. Continued high LNG send-out, milder weather and falling commodity prices have pressured prices lower across the curve. All baseload power contracts fell this week, with day-ahead baseload power down 8.7% to an 11-week low of £60.9/MWh. Power prices have fallen amid higher wind generation and healthier supplies as nuclear generation capacity returns. Seasonal contracts were down 3.6% on average, with summer 19 falling to a 10-week low of £54.2/MWh. All gas contracts fell, with day-ahead gas decreasing 6.9% to end the week at an 11-week low of 61.5p/th. The decline follows several LNG deliveries in the previous weeks and further cargoes contracted for next week. Milder temperatures are forecast into the middle of the month which should ease gas demand for heating. The weekly average Brent crude oil price fell for a fourth consecutive week, dropping 2.2% to average $75.6/bl. Oil prices dropped to a two-month low of $72.5/bl on 2 November, as the US government granted waivers ahead of sanctions on Iran. API 2 coal prices curtailed, dropping 3.7% to average $94.1/t, prices ended the week at $92.5/t, a one-month low. EU ETS carbon prices slipped 14.2% to average €16.3/t. Prices dropped to a four-month low of €15.2/t on 1 November, following the release of the Autumn Budget earlier in the week.

Baseload electricity
Day-ahead power fell 8.7% to £60.9/MWh. Prices fell to an 11-week low of £60.5/MWh on 1 November, following gas contracts down. December 18 power fell to a multi-month low, dropping 5.8% to £62.2/MWh.		Annual April 19 power decreased 4.4% to £57.2/MWh, the lowest since 20 August. The contract is £7.5/MWh (11.6%) lower than the same period last month, and 32.0% above the same time last year when it was £43.3/MWh.
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power decreased 9.3% week-on-week to £67.1/MWh. This was £6.2/MWh above its baseload counterpart. Month-ahead peak power went down 2.2% to end the week at £70.0/MWh, £7.8/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power went down 3.4% to £63.3/MWh. The contract was £6.1/MWh above its baseload power counterpart. The contract was 10.6% below its price last month (£70.8/MWh) and 28.5% higher than its value last year (£49.3/MWh).
Forward curve comparison		Annual October Contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal contracts were down 3.6% on average. Summer and winter 19 fell 4.9% and 4.0% to £54.2/MWh and £60.2/MWh respectively. Summer 20 power was down 3.9% to £49.9/MWh.		Most seasonal peak power contracts decreased this week, down 2.2% on average. Prices followed their gas counterparts; however seasonal gas contracts fell 5.1% on average.

Commodity price movements
Oil and Coal		Carbon
The weekly average Brent crude oil price fell for a fourth week, dropping 2.2% to average $75.6/bl. Oil prices dropped to a two-month low of $72.5/bl on 2 November, the lowest since August, as the US government granted waivers ahead of sanctions on Iran and it was announced that OPEC production in October was at its highest since December 2016. This coincided with US crude production data revealing the country hit an all-time high of 11.3mn bpd in August, further pressuring prices. API 2 coal prices dropped 3.7% to average $94.1/t. Prices ended the week at $92.5/t, a one-month low, with high stocks remaining at ARA terminals, whilst warmer weather in Asia reduces demand further.		EU ETS carbon prices slipped 14.2% to average €16.3/t. Prices dropped to a four-month low of €15.2/t on 1 November, following the release of the Autumn Budget earlier in the week which did little to create long-term certainty for the UK’s future carbon pricing policy. Traders are also citing speculator sell-off as adding fuel to the bearish momentum. Although carbon prices fell below $16/t last week, the start of the Market Stability Reserve in January is expected to increase EUA buying and could see prices return towards $20/t before the year ends.

Wholesale price snapshot