Energy Wholesale Market Review, 22 July 2022

Headlines

This week we observed a relatively mixed picture for the movements of wholesale gas and power contracts. Generally, we saw near-term gas contracts climb, whereas the power equivalent contract observed notable losses week-on-week. The week saw day-ahead gas prices rise 38.6% to 282.00p/th, following an unplanned outages at Norway’s FLAGS exist terminal, reducing Norwegian gas flows into GB and compiling greater levels of system undersupply during select periods in the week. Conversely, day-ahead power fell 30.3% to £233.5/MWh, amid reduced demand seen across the week amid continued higher temperatures and periods of heightened wind output. Most seasonal gas contracts declined this week, down by 0.7% on average, with winter 22 gas dropping 3.1% to 410.05p/th, whereas summer 23 gas increased 2.2% to 291.05p/th. Elsewhere, seasonal power contracts saw gains, up on average by 4.5%, as winter 22 and summer 23 expanded 7.9% and 2.0% respectively, rising to £478.00/MWh and £250.00/MWh.

Baseload electricity
  • Day-ahead power fell 30.3% to £233.5/MWh, following reduced demand seen across the week amid continued higher temperatures and periods of heightened wind output.
  • August 22 power climbed 19.2% at £292.0/MWh and September 22 power rose 6.1% to £350.0/MWh.
  • The annual October 22 contract rose 3.1% to £354.5/MWh, 488.4% higher than the same time last year (£60.25/MWh).
Forward Curve Comparison

 

Annual October Contract

Peak electricity
  • Day-ahead peak power was down 40.7% to £240.00/MWh, following baseload power lower.
  • August 22 peak power gained 10.3% at £314.5/MWh, and September 22 peak power increased 3.0% to £375.25/MWh.
  • The annual October 22 peak power rose 0.5% to £421.63/MWh
  • This is 499.4% higher than the same time last year (70.34/MWh).

Forward curve comparison

 

Annual October contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

 

  • All tracked seasonal power contracts experienced gains this week, up on average by 4.5%.
  • Winter 22 and summer 23 expanded 7.9% and 2.0% respectively, rising to £478.00/MWh (a record high) and £250.00/MWh.
  • Some seasonal peak power contracts saw minor gains this week, up 0.6% on average.
  • Winter 22 gas increased 1.2% to £568.00/MWh, while summer 23 peak power dropped 0.9% to £275.25/MWh.
Commodity price movements
 

Oil and Coal

 

Carbon

  • Brent crude prices rose 2.6% last week to average $104.03/bl, reversing two consecutive weeks of average price decline.
  • Primarily, the continuation of on-going concerns around the tight supply landscape for oil markets pushed prices higher last week.
  • The concerns of future oil supply overshadowed potential lowering demand levels prompted by the possibility of a global recession.
  • However, any sustained price rises last week were capped later in the week by returning energy supply from Russia and Libya, combined with increased US stockpile levels in parallel.
  • API 2 coal fell 8.7% to average $261.40/t.
  • The EU and UK ETS shared price losses last week. The EU ETS fell 3.7% to average €81.44/t whilst the UK ETS went down 0.5% to average £81.50/t.
  • For the EU ETS, we observed a noteworthy sell-off in EUA’s – a response to prices dropping below key technical levels.
  • Similarly, mixed reactions on the back of the European Commission’s plans to reduce gas demand ahead of winter could see a reduction in fossil fuel demand more broadly.
  • UK ETS prices were weighed by the on-going warmer weather trends we have observed recently, stifling demand for fossil fuel generation.
Wholesale price snapshot 

 

Posted by TEAM on 25 July 2022