Home » News » Wholesale Market Review » 23 August 2019

Energy Wholesale Market Review, 23 August 2019

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The majority of baseload power and gas contracts fell this week, with winter 19 power dropping to £52.1/MWh, the lowest since 4 May 2018, while winter 19 gas ended the week at 46.8p/th, the lowest since 2 August 2017. However, day-ahead power and gas contracts rose, with the former up 14.8% to end the week at £41.0/MWh, mirroring its gas counterpart which gained 7.3% to 29.3p/th. Day-ahead gas was supported by the extension of the unplanned outage at Culzean until 24 August, while the start of maintenance at Norwegian gas fields over the bank holiday weekend added further support. September and October 19 gas contracts both fell, down 4.4% and 9.5% to 30.3p/th and 32.1p/th respectively. Forecasts of above normal level temperatures in September have pressured the month-ahead gas contract, offsetting concerns of tighter supplies following maintenance in Norway. September and October 19 power contracts were 3.8% and 6.1% lower at £40.9/MWh and £41.8/MWh respectively. Brent crude oil found support from another decline in US crude stocks and rose 1.7% to average $59.9/bl, while API 2 coal and EU ETS carbon fell to two-month lows of $63.5/t and €25.3/t respectively. Ongoing uncertainty around Brexit, and speculation that a no-deal is increasingly likely, has been a key bearish price driver for carbon this month.

Baseload electricity
Day-ahead power was up 14.8% to £41.0/MWh, as lower wind generation is forecast over the bank holiday weekend and early next week. September and October 19 power contracts were 3.8% and 6.1% lower at £40.9/MWh and £41.8/MWh respectively. Both contracts are at a three-week low.		Annual October 19 power dropped 2.8% week-on-week to £49.9/MWh. The contract is 6.4% below the same time last month (£53.4/MWh), and 11.4% lower than the same time last year (£56.4/MWh).
Forward curve comparison		Annual October Contract
Peak electricity
Day-ahead peak power was up 8.8% to £42.3/MWh, just £1.3/MWh above its baseload counterpart. September and October 19 peak power decreased by 3.4% and 5.3% to £44.1/MWh and £46.8/MWh, respectively.		Annual October 19 peak power was 2.3% lower at £55.5/MWh, £5.6/MWh above its baseload power counterpart. The contract is 5.9% below its value this time last month (£59.0/MWh), and 7.3% below the same time last year when it was £62.8/MWh.
Forward curve comparison		Annual October contract
Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal baseload power contracts were down 2.0% on average. Winter 19 power declined 3.3% to £52.1/MWh, the lowest since 4 May 2018.		All seasonal peak power contracts were down, falling 1.5% on average. Winter 19 peak power decreased 2.5% to £58.8/MWh, the lowest since 4 May 2018.
Commodity price movements
Oil and Coal		Carbon
Brent crude oil was up 1.7% to average $59.9/bl. Prices were supported by news of another weekly decline in US crude stocks, which fell by 2.73mn barrels to around 438mn. However, this is still a 30mn barrel increase year-on-year. Norwegian investment bank DNB Markets recently lowered its forecasts for 2019 oil prices to average $66/bl (previously $73/bl), citing expectations of lower demand growth amid the global economic slowdown and higher non-OPEC production. API 2 coal prices fell 1.5% to average $64.0/t. Coal prices dropped to a two-month low of $63.5/t on 22 August, as demand remained relatively weak as cheaper gas prices and relatively high carbon prices continue to keep coal-fired power plant above gas in the GB electricity market merit order.		EU ETS carbon prices averaged €26.3/t, down 1.8% from the previous week. Carbon prices dropped as low as €25.3/t at the German auction on 23 August, a two-month low. Ongoing uncertainty around Brexit, and speculation that a no-deal is increasingly likely, has been a key bearish price driver this month. The final week in August is the last week before auction volumes return to normal levels in September, with total volumes up 16% to 6.7mn EUAs despite no auction taking place on 26 August due to the UK bank holiday.
Wholesale price snaphot