Energy Wholesale Market Review, 24 January 2022

Headlines

This week represented a relatively mixed picture for gas and power price movements, but slightly favouring a more bearish outlook overall, particularly on front-month and longer dated seasonal contracts more specifically. In support of this bearish sentiment, day-ahead gas fell 13.8% to 187.0p/th, following periods of increased Norwegian gas flows into the UK, softening an on-going tight gas supply picture between Europe and the UK at present. Day-ahead power represented the comparable outlier, rising 14.0% to £272.5/MWh, a second consecutive week of price growth, driven primarily by lowering wind outturn tightening system margins and higher trending demand. February 22 gas was down 13.9% at 186.3p/th, and March 22 gas decreased 13.4% to 185.3p/th. Most seasonal gas contracts declined this week, down by 4.4% on average, while both summer 22 and winter 22 gas dropped 6.4% and 6.4% respectively, subsiding to 163.4p/th and 170.9p/th. The majority of seasonal power contracts also saw losses this week, down on average by 2.3%, as summer 22 power decreased 3.4% to £158.5/MWh, while winter 22 fell 4.0% to £167.0/MWh.

Baseload electricity
  • Day-ahead power rose 14.0% to £272.5/MWh, a second consecutive week of price growth, driven primarily by lowering wind outturn tightening system margins and higher trending demand.
  • February 22 power slipped 13.2% at £198.0/MWh and March 22 power decreased 12.1% to £182.0/MWh.
  • Q222 power moved 3.6% lower to £162.0/MWh.
  • The annual April 22 contract lost 3.7% to £162.7/MWh, 222.2% higher than the same time last year (£50.5/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was up 22.2% to £330.0/MWh, following baseload power higher.
  • February 22 peak power gained 4.3% at £266.0/MWh, and March 22 peak power increased 2.6% to £200.0/MWh.
  • The annual April 22 peak power rose 2.7% to £180.0/MWh
  • This is 217.5% higher than the same time last year (56.7/MWh).

Forward curve comparison

 

Annual April contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

  • Most seasonal power contracts declined this week, down on average by 2.3%.
  • Summer 22 power decreased 3.4% to £158.5/MWh, while winter 22 fell 4.0% to £167.0/MWh.
  • Seasonal peak power contracts largely moved higher this week, up 14.5% on average, with strong gains on the winter 23 contract
  • Summer 22 to dropped to £160.0/MWh and winter 22 remained unchanged from the week prior at £200.0/MWh.
Commodity price movements

Oil and Coal

 

Carbon

  • Brent crude prices climbed again this week, up 4.6% to average $87.4/bl, including a fresh near seven year high on 19 January at $88.58/bl.
  • Prices this week continued to find bullish price support, buoyed by sentiment that global demand recovery will likely outpace OPEC+ supply in the short-term.
  • Some more bullish drivers specific to the week prior helped prices climb further too. Attacks in the Mideast Gulf contributed to supply concerns in an already tight gas market. Compounding this further, supply disruption following an outage on a pipeline from Iraq to Turkey exacerbated market tightness.
  • Carbon prices saw mixed movements this week. The UK ETS rose 2.8% to £74.2/t. The EU ETS market diverged against these trends, remaining virtually unchanged at €81.62/t.
  • For the UK ETS market, prices continued to gain support from periods of lower wind outturn, placing increased reliance on gas-fired plant to meet elevated levels of demand.
  • UK ETS prices also found support from the UK ETS Authority announcing they are not intervening in the market, despite the January 2022 trigger price being hit under the Cost Containment Mechanism (CCM).
  • The mechanism is designed to be a safeguard against high price volatility in the UK carbon market
Wholesale price snapshot 

 

Posted by TEAM on 24 January 2022