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Energy Wholesale Market Review, 21 December 2018

Headlines

The majority of wholesale power and gas contracts rose week-on-week, with summer 20 power and gas contracts the exception. Prices have risen despite a 5.6% decrease in Brent crude oil from the previous week, and have found support from surging EU ETS carbon prices, up 14.0%, and weaker wind generation. Day-ahead power rose 2.2% to end the week at £65.5/MWh. Forecasts of falling wind generation in the coming weeks have supported day-ahead power prices. January 19 power also went up by 2.2%, ending this week at £68.9/MWh. Most seasonal baseload power contracts increased week-on-week, up 0.6% on average. Most gas contracts increased this week, with near-term contracts supported by an undersupplied gas system with the recent high LNG send-out slipping. Week-on-week day-ahead gas gained 0.7% to 66.9p/th. This is 0.7% below the same time last month when it was 67.3p/th. Seasonal gas contracts lost 0.2% on average. API 2 coal prices gained 0.8% to average $88.9/t. Brent crude oil prices dropped 5.6% to average $57.2/bl last week. Within-day prices fell below $52.9/bl on 21 December, the lowest since September 2017, as concern of an oversupplied market continues to grow. EU ETS carbon prices surged 14.0% to average €24.3/t. Within-day carbon prices rose to €25.0/t on 19 December, a fresh three-month high, with the upcoming Market Stability Reserve (MSR) starting in January 2019 reducing EUA auction volumes.

Baseload electricity
Day-ahead power rose 2.2% to end the week at £65.5/MWh amid forecasts of low wind generation. January 19 power also went up by 2.2%, ending this week at £68.9/MWh. February 19 increased 1.8% to £68.2/MWh.		Annual April 19 power climbed 0.6% to £62.2/MWh. The contract is 4.4% above the same time last month when it was £59.6/MWh and 41.4% higher than its value last year (£44.0/MWh).
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power was unchanged from the previous week at £70.5/MWh. This was £5.0/MWh above its baseload counterpart. Month-ahead peak power went up 3.3% to end the week at £77.0/MWh, £8.1/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power gained 0.8% to £67.8/MWh. The contract was £5.6/MWh above its baseload power counterpart. The contract was 3.7% above its price last month (£65.4/MWh) and 37.3% higher than its value last year (£49.4/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Most seasonal baseload power contracts increased week-on-week, up 0.6% on average. Summer and winter 19 rose 0.6% and 0.7% to £59.4/MWh and £65.1/MWh respectively.		Most seasonal peak power contracts went up this week, rising 0.4% on average. Summer 20 peak power was the exception, dropping 0.5% to £59.4/MWh.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil prices dropped 5.6% to average $57.2/bl last week. Within-day prices fell below $52.9/bl on 21 December, the lowest since September 2017, as concerns of an oversupplied market continue. Last week the International Energy Agency also reported that it expects total US oil production to be nearly equal to the combined production of Russia and Saudi Arabia by 2025, equating to approximately 22.6mn bpd. API 2 coal prices gained 2.1% to average $88.1/t. According to government data released on 20 December, UK coal imports in October were at their highest since January, up 1% year-on-year. UK coal stocks were at 4.1mn tonnes in October, a third lower than the same time last year.		EU ETS carbon prices lifted 14.0% to average €24.3/t. Within-day carbon prices rose €25.0/t on 19 December, a fresh three-month high, with the upcoming Market Stability Reserve (MSR) starting in January 2019 reducing EUA auction volumes. Tighter auction volumes in the upcoming MSR is expected to continue to support EUA prices to the end of the year. The postponement of auctions until 7 January 2019, is also providing upside to carbon prices.

Wholesale price snapshot