Energy Wholesale Market Review, 21 March 2022

Headlines

This week represented another largely bearish period for gas and power contracts, both for short-term delivery and further out on the forward curve too – helped by talks of a potential ceasefire in Ukraine, softening future gas disruption concerns amidst the conflict. As such, day-ahead gas fell 16.9% to 245.00p/th, following the aforementioned developments, coupled with warmer weather and increased LNG send-out, helped by US LNG cargoes arriving at UK terminals. Subsequently, day-ahead power fell 2.2% to £225.00/MWh, taking direction from its gas counterpart, and rising levels of wind generation on the system as the week matured. Font month contracts fell too, down April 22 gas was down 19.7% at 254.30p/th, and May 22 gas decreased 19.0% to 256.15p/th. Elsewhere, the majority of seasonal gas contracts dropped this week, with summer 22 to winter 23 falling 17.0% on average. A notable outlier was the summer 24 contract however, rising 128.6% to 96.00p/th, owing in part to better liquidity in forwards gas contracts this week. Similarly, seasonal power contracts also saw losses this week, down on average by 7.6%, as summer 22 power decreased 11.5% to £230.00/MWh, while winter 22 fell 12.3% to £228.00/MWh.

Baseload electricity
  • Day-ahead power fell 2.2% to £225.00/MWh, following its gas counterpart contract lower, weighed further by periods of elevated wind outturn as the week progressed.
  • April 22 power slipped 14.8% at £230.00/MWh and May 22 power decreased 13.5% to £231.00/MWh.
  • Q2-22 power moved 12.3% lower to £229.75/MWh.
  • The annual April 22 contract lost 11.9% to £229/MWh, 314.5% higher than the same time last year (£55.25/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was down 4.1% to £235.00/MWh, following baseload power lower.
  • April 22 peak power declined 14.8% at £244.10/MWh, and May 22 peak power decreased 15.9% to £240.3/MWh.
  • The annual April 22 peak power rose 11.0% to £256.15/MWh.
  • This is 315.8% higher than the same time last year (61.61/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 7.6%.
  • Summer 22 power decreased 11.5% to £230.00/MWh, while winter 22 fell 12.3% to £228.00/MWh.
  • All seasonal peak power contracts fell this week, down 7.2% on average.
  • Summer 22 and winter 22 peak power dropped 13.3% and 8.8% respectively, falling to £241.50/MWh and £270.80/MWh.
Commodity price movements
 

Oil and Coal

 

Carbon

  • Brent crude prices declined week-on-week for the first time in several weeks, down 14.4% to average $103.98/bl.
  • This week represented a largely bearish week for Brent crude prices, with consecutive losses across most days.
  • Furthermore, progressive talks over a potential ceasefire in Ukraine eased future supply disruption concerns within the market, allowing prices to retreat slightly.
  • Elsewhere, the potential for Saudi Arabia to increase oil output into the market has also subdued prices slightly, softening the on-going tight landscape.
  • Carbon markets reversed what had been two consecutive weeks of losses this week, both rising week-on-week. The UK ETS lifted 10.1% to average £79.95/t, with the EU ETS sharing similar growth, up 8.0% to average £75.35/t.
  • Carbon markets remain sensitive to wider geopolitical developments, particularly that of the conflict between Russia and Ukraine. Primarily, potential changes in future fossil fuel supply and consumption, and moving over to renewable generation will place less demand on fossil-fuel fired plant. Elsewhere, financial markets remain particularly volatile, with financial traders who hold EUA’s still selling off volumes.
Wholesale price snapshot 

 

Posted by TEAM on 21 March 2022