Energy Wholesale Market Review, 24 June 2022

Headlines

This week has seen mixed movements across gas and power wholesale contracts, but with day-ahead markets enjoying price growth in the week on the back of some bullish market fundamentals at play. Subsequently, day-ahead gas rose 17.2% to 170.00p/th, helped by periods of increased gas-for-power demand at the week’s start and maintenance works at select parts of the Norwegian Continental Shelf (NCS), lowering flows into GB. Similarly, day-ahead power rose 2.4% to £174.00/MWh, taking direction from upward movements of its equivalent gas contract, coupled with periods of low wind outturn at the front-end of this week. Conversely, July 22 gas was down 21.1% at 185.76p/th, and August 22 gas decreased 10.6% to 240.35p/th. Elsewhere, most seasonal gas contracts rose last week, up by 3.5% on average, with both winter 22 and summer 23 gas increasing 8.0% and 4.5% respectively, lifting to 338.05p/th and 213.55p/th. Seasonal power contracts saw similar movements, broadly following their gas counterparts, up on average by 2.0%, as winter 22 and summer 23 increased 5.2% and 2.7% respectively, rising to £315.00/MWh and £190.00/MWh. For international commodity markets, they equally did not hold a universal trend, with Brent crude prices falling 7.1% this week to average $111.73/bl, while EU ETS prices climbed 0.4% to average €83.75/t. On the flip side, UK ETS prices fell marginally, down 0.8% to £80.98/t.

Baseload electricity
  • Day-ahead power rose 2.4% to £174.00/MWh, supported by higher gas prices and benefitting from periods of lower wind outturn at the front end of the week.
  • July 22 power slipped 7.8% at £207.5/MWh and August 22 power decreased 3.3% to £236.00/MWh.
  • Q322 power moved 3.6% lower to £242.5/MWh.
  • The annual October 22 contract rose 4.2% to £252.5/MWh, 287.0% higher than the same time last year (£65.25/MWh).
Forward Curve Comparison

 

Annual October Contract

Peak electricity
  • Day-ahead peak power was up 5.7% to £185.00/MWh, following its baseload power contract higher.  
  • July 22 peak power upticked 0.1% at £219.32/MWh, and August 22 peak power increased 5.1% to £245.92/MWh.
  • The annual October 22 peak power rose 6.7% to £298.25/MWh
  • This is 387.3% higher than the same time last year (61.2/MWh).

Forward curve comparison

 

Annual October contract

 

Seasonal power prices

Seasonal baseload power contracts

 

 

Seasonal baseload power curve

 

 

  • The majority of seasonal power contracts boosted this week, up on average by 2.0%.
  • Winter 22 and summer 23 expanded 5.2% and 2.7% respectively, rising to £315.00/MWh and £190.00/MWh
  • Mirroring movements in baseload contracts, most seasonal peak power contracts also grew this week, up 3.7% on average.
  • Winter 22 and summer 23 peak power increased 8.2% and 4.2% respectively, rising to £379.50/MWh and £217.00/MWh.
Commodity price movements
 

Oil and Coal

 

Carbon

  • Brent crude prices fell 7.1% this week to average $111.73/bl.
  • Predominately, wider market concerns over sluggish global demand growth across oil markets weighed on prices throughout the week – with concerns demand for Brent crude is not improving at the rate expected.
  • Elsewhere, reports that US president Joe Biden has called for fuel tax cuts to soften the costs consumers are paying at the pumps will weigh on prices in the near-term if this action is progressed.
  • API 2 coal rose 15.5% to average $258.60/t.
  • The EU and UK ETS experienced conflicting price movements last week. Subsequently, the EU ETS climbed 0.4% to average €83.75/t whereas the UK ETS fell marginally, down 0.8% to £80.98/t.
  • As a piece of industry news, the European parliament committee as of 22 June agreed on new parliamentary reforms for the EU ETS carbon market – something they had failed to agree on earlier this month.
  • These reforms form part of a legislative package presented by the Commission on July 14, 2021, to implement the climate transition, which should enable the EU-27 to reduce their CO2 emissions by 55% by 2030 in compliance with the Paris climate agreement.
  • As part of these proposals, the EU’s executive European Commission has planned to remove a significant amount of surplus EUA’s from the market.
Wholesale price snapshot 

 

Posted by TEAM on 27 June 2022