Energy Wholesale Market Review, 20 August 2021

Headlines

On balance, the picture for gas and power prices this week was predominately mixed, but slightly favouring a more bearish outlook. Whilst a significant amount of contracts across gas and power markets fell this week, prices generally remain at significant highs, achieving record highs in the week also. Day-ahead gas fell 6.1% to 103.25p/th, in what transpired as a relatively volatile week for gas prices. Prices exceeded three-year highs across three separate days during the week, predominately buoyed by higher gas-for-power demand. Friday-on-Friday prices ultimately fell with the announcement from Gazprom that they could pump 5.6bcm of gas via Nord Stream 2, with flows expected by the end of this year. Day-ahead power rose 1.9% to £107/MWh, taking direction from bullish price movements on near-term gas contracts, particularly at the mid-points of the week. A three-year high was also achieved on 18 August at £128.00/MWh. September 21 gas was down 9.0% at 102.96p/th, and October 21 gas decreased 8.1% to 106.04p/th. Most seasonal gas contracts declined this week, down by 3.1% on average, while both winter 21 and summer 22 gas dropped 7.5% and 4.3% respectively, subsiding to 107.17p/th and 68.79p/th. The majority of seasonal power contracts fell this week, down on average by 2.2%, as winter 21 power decreased 5.1% to £107.50/MWh, while summer 22 fell 3.8% to £75.25/MWh.

Baseload electricity
  • Day-ahead power rose 1.9% to £107/MWh, taking direction from gas prices, particularly at the week’s start.
  • September 21 power slipped 6.9% at £101.75/MWh and October 21 power decreased 1.6% to £110/MWh.
  • Q421 power moved 4.4% lower to £109.95/MWh.
  • The annual October 21 contract lost 4.6% to £91.38/MWh, 99.2% higher than the same time last year (£45.87/MWh).

Forward curve comparison

Curve Comparison 20 August 2021

Annual October Contract

Annual October Contract 20 August 2021

Peak electricity
  • Day-ahead peak power was up 4.5% to £115.00/MWh, following its baseload counterpart higher.
  • September 21 peak power gained 2.1% at £112/MWh, and October 21 peak power increased 2.0% to £110.99/MWh.
  • The annual October 21 peak power contract fell 7.3% to £102.63/MWh.
  • This is 99.3% lower than the same time last year (51.5/MWh).

Forward curve comparison

Forward Curve Comparison 20 August 2021

Annual October contract

Annual October Curve 20 August 2021

Seasonal power prices

Seasonal baseload power contracts

Seasonal baseload power curve

  • The majority of seasonal power contracts declined this week, down on average by 2.2%.
  • Winter 21 power decreased 5.1% to £107.50/MWh, while summer 22 fell 3.8% to £75.25/MWh.
  • Most seasonal peak power contracts boosted this week, up 8.4% on average.
  • Winter 21 gas increased 13.7% to £128.75/MWh, while summer 22 peak power dropped 1.9% to £76.50/MWh.
Commodity price movements

Oil and Coal

Carbon

  • Brent crude oil slipped for the third consecutive week this week. As such, prices averaged 2.7% lower than the previous week at $68.31/bl.
  • In conjunction with these losses, on 20 August, Brent crude slipped to a three-month low of $66.31/bl.
  • The primary driver of bearish movements stemmed from demand concerns.
  • Reports circulating this week highlighted rising Covid-19 cases and the increased prevalence of variants, which continues to intensify concern within the market.
  • The UK carbon market rose for the fourth consecutive week, building on strong recorded gains. Subsequently the UK ETS rose 2.4% to £49.23/t, with the EU ETS rebelling these bullish price movements, down 0.3% to €56.59/t, however.
  • The UK ETS also breached £50.00/t on 17 August, its highest since the opening week of the scheme.
  • Bullish supporting trends across carbon markets remain relatively consistent. Tighter gas markets, across North-West Europe and the UK bolster prices. Similarly, lowering auction volumes in August continue to lend support, driving increased competition for limited EUA’s.
Wholesale price snapshot 

Posted by TEAM on 23 August 2021
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