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Energy Wholesale Market Review, 22 February 2019

Headlines

Nearly all wholesale gas and power contracts fell this week, with day-ahead power the only exception amid forecasts of lower wind generation next week. Wholesale prices have continued to be pressured by milder temperatures, lower demand and comfortable gas supplies, despite three-month high Brent crude oil prices. However, day-ahead power rose 1.2% to end the week at £49.1/MWh, amid forecasts of lower wind generation. The contract hit a fresh eight-month low of £48.1/MWh on 19 February as wind generation was forecast higher the following day. Seasonal power contracts decreased 1.5% on average from the previous week and were an average of 7.4% lower than the same time last month. All gas contracts continued lower this week. The gas system remained comfortably supplied, with the arrival of LNG tankers, milder temperatures, and strong supplies from Norway despite an outage at Aasta Hansteen gas field. Day-ahead gas dropped 4.4% to end the week at a fresh 17-month low of 44.8p/th. This is the lowest since 23 October 2017 and 28.3p/th below the same time last year. Brent crude oil rose for the third consecutive week, up 5.2% to average $66.7/bl. Within-day oil prices rose above $67.5/bl on 22 February, the highest since 16 November 2018. EU ETS carbon prices fell 5.1% to average €19.9/t. Within-day carbon prices fell below €18.5/t on 22 Friday, a fresh three-month low. API 2 coal prices started to reverse recent declines, up 2.6% to average $78.0/t.

Baseload electricity
Day-ahead power rose 1.2% to £49.1/MWh. The contract hit a fresh eight-month low of £48.1/MWh on 19 February. March and April 19 power contracts dropped 4.2% and 3.8% to £48.1/MWh and £47.9/MWh, respectively.		Annual April 19 power was down 2.0% to £52.7/MWh, the lowest since 27 July 2018. The contract is 2.0% below the same time last month when it was £58.4/MWh, but 20.7% above the same time last year when it was £43.7/MWh.
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power rose 0.8% to £52.9/MWh, £3.8/MWh above its baseload counterpart. Day-ahead peak power is 25.2% lower than the same time last year when it was £64.7/MWh. Month-ahead peak power fell 4.6% to end the week at £51.8/MWh, £3.7/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power declined 2.1% to £58.1/MWh, £5.4/MWh above its baseload power counterpart. The contract was 9.0% below its price last month (£63.8/MWh), but 20.2% higher than its value last year (£48.3/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal baseload power contracts dropped 1.5% on average from the previous week, following their gas counterparts lower. Summer 19 power saw the largest change, dropping 2.6% to £47.9/MWh, a fresh nine-month low.		All seasonal peak power contracts went down this week, decreasing 1.7% on average. The summer 19 peak contract was 2.7% lower, falling to £51.7/MWh, £3.8/MWh above its baseload power counterpart.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil rose for the third consecutive week, up 5.2% to average $66.7/bl. Within-day oil prices rose above $67.5/bl on 22 February, the highest since 16 November 2018. Prices were supported by news of high compliance from OPEC members with the 1.2mn bpd production cuts. Concerns of a tighter market comes despite data released by EIA showing that US crude oil production has hit a record 12mn bpd the previous week. API 2 coal prices started to reverse recent declines, up 2.6% to average $78.0/t. This week, Glencore, which accounts for ~25% of global thermal coal supply, announced that it would not increase production beyond 2019.		EU ETS carbon prices fell 5.1% to average €19.9/t. Within-day carbon prices fell below €18.5/t on 22 Friday, a fresh three-month low. Carbon prices have been pressured by a fall in gas prices throughout Europe, which have been weighed on by above seasonal normal temperatures and comfortable gas supplies. Comfortable gas supplies, particularly with the influx of LNG tankers to the NW Europe, has improved the economics for gas-fired power plants to generate electricity during period of low renewables output and pushed coal-fired power plants out of the power mix. Ongoing talks about coal phase-out plans across the EU, as well as the potential for stricter emissions reductions by 2030, also prevented gains in carbon.

Wholesale price snapshot