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Energy Wholesale Market Review, 22 March 2019

Headlines

Wholesale power and gas contracts fell across the board this week, with many contracts hitting new lows. Day-ahead gas fell to a 20-month low as comfortable supplies and mild temperatures continued. This trend drove day-ahead power prices to a 17-month low, despite lower wind generation. All baseload power contracts fell week-on-week. Day-ahead power was down 7.4% to end the week at £44.0/MWh. The contract fell to £43.1/MWh on 21 March, a fresh 17-month low as the contract followed its gas counterpart lower. All seasonal power contracts continued lower, dropping 2.7% on average. Summer and winter 19 power contracts fell 4.1% and 2.9% to £43.6/MWh and £53.5/MWh respectively, with summer 19 power at a fresh 11-month low. All gas contracts fell week-on-week, as above seasonal normal temperatures continued to drive down gas demand, leaving the gas system oversupplied for most of the week. Day-ahead gas dropped 5.4% to end the week at a 36.9p/th. The contract dropped to a fresh 20-month low of 36.8p/th on 20 March, as two LNG tankers were scheduled to arrive the following day. Seasonal gas contracts decreased 2.8% on average. Summer 19 gas dropped 5.5% to end the week at 36.9p/th, the lowest since June 2016. Brent crude oil prices rose slightly, up 0.9% to average $67.6/bl. Within-day oil prices rose to a fresh four-month high of $68.7/bl on 22 March. API 2 coal prices fell for a third consecutive week, down 3.0% to average $73.5/t. Within-day prices ended the week at $73.0/t, a fresh one-year low.

Baseload electricity
Day-ahead power was down 7.4% at £44.0/MWh. The contract fell to £43.1/MWh on 21 March, a17-month low as the contract followed gas prices lower. The April and May 19 power contracts were down 4.3% and 4.2% to £43.1/MWh and £42.4/MWh, respectively.		Annual April-19 power was 3.4% lower week-on-week, falling to £48.5/MWh. The contract is 8.0% below the same time last month (£52.7/MWh), but 8.7% above the same time last year when it was £44.6/MWh.
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power decreased 8.3% to £45.4/MWh, just £1.4/MWh above its baseload counterpart. Day-ahead peak power is 14.3% lower than the same time last year when it was £53.0/MWh. April and May 19 peak power fell 3.5% and 4.1% to £45.9/MWh and £45.7/MWh, respectively.		Annual April 19 peak power decreased 3.2% to £53.8/MWh, remaining £5.3/MWh above its baseload power counterpart. The contract is 7.4% below its price last month (£58.1/MWh), but 9.4% higher than its value last year (£49.2/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
All seasonal power contracts continued to drop further, decreasing 2.7% on average. Summer and winter 19 power fell 4.1% and 2.9% to £43.6/MWh and £53.5/MWh, respectively.		All seasonal peak power contracts were lower this week, falling 2.4% on average. The summer 19 peak contract was down 4.0% at £47.3/MWh, remaining £3.7/MWh above its baseload power counterpart.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil prices rose slightly, up 0.9% to average $67.6/bl. Within-day oil prices rose to a fresh four-month high of $68.7/bl on 22 March. This week, OPEC announced that it would be cancelling its technical meeting in April. The group does not believe that the meeting would have provided enough time to properly evaluate the latest production cuts, meaning the cuts will not continue until the next meeting in June. API 2 coal prices fell for a third consecutive week, down 3.0% to average $73.5/t. Within-day prices ended the week at $73.0/t, a fresh one-year low. Coal prices have been pressured by weaker demand as gas prices continue to fall and warmer temperatures ease conventional power generation in the Northern Hemisphere.		EU ETS carbon prices fell 5.6% to average €21.3/t. Within-day carbon prices dropped as low as €20.7/t on 20 March, a near one-month low. Carbon prices have been pressured by waning demand for coal-fired power generation in Europe as warmer weather dampens electricity demand, and very low gas prices continue to drive the favourability of CCGT generation in the supply mix. Brexit negotiations continue to add uncertainty to the EU ETS market, but the news that a ‘hard-Brexit’ has been ruled out for 29 March, and an unconditional extension has been set for 12 April with the potential for a further delay until 22 May, has provided some respite for falling carbon prices.

Wholesale price snapshot