Energy Wholesale Market Review, 25 February 2022

Headlines

This week has represented a significant upward shift in gas and power prices for near-term contracts as well as further along the forward curve, primarily in response to news surrounding the Russian invasion of Ukraine. Subsequently, day-ahead gas rose 50.0% to 255.00p/th, following the aforementioned news war has broken out in Ukraine, fuelling future gas supply concerns from Russia, which contributes a significant proportion of natural gas to the continent. Day-ahead power rose 72.0% to £227.00/MWh, taking direction from the bullish movements in gas contracts across the board, in what represents a relatively unprecedented political event in Europe. Subsequently, March 22 gas was up 51.1% at 259.66p/th, and April 22 gas increased 50.9% to 259.96p/th. Nearly all seasonal gas contracts boosted this week, up by 31.4% on average, with summer 22 and winter 22 gas increasing 49.9% and 46.6% respectively, lifting to 258.67p/th and 265.91p/th. Seasonal power contracts rose this week sharing similar growth to their seasonal gas counterparts, up on average by 28.0%. Summer 22 and winter 22 expanded 39.1% and 36.9% to £231.25/MWh and £245.00/MWh, respectively.

Baseload electricity
  • Day-ahead power rose 72.0% to £227.00/MWh, following strong gains set in near-term gas contracts, amid Russia-Ukraine conflict.
  • March 22 power climbed 44.6% to £241.52/MWh and April 22 power increased 41.5% to £237.00/MWh.
  • Q222 power moved 38.7% higher to £233.00/MWh.
  • The annual April 22 contract rose 38.0% to £238.13/MWh, 357.9% higher than the same time last year (£52.00/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was up 57.5% to £252.00/MWh, following baseload power higher.
  • March 22 peak power gained 1.7% to £193.5/MWh, and April 22 peak power decreased 7.1% to £170.00/MWh.
  • The annual April 22 peak power rose 7.4% to £194.63/MWh
  • This is 233.0% higher than the same time last year (£58.45/MWh).

Forward curve comparison

 

Annual April contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

  • All seasonal power contracts boosted this week, up on average by 28.0%.
  • Summer 22 and winter 22 expanded 39.1% and 36.9% respectively, rising to £231.25/MWh and £245.00/MWh.
  • Most seasonal peak power contracts climbed this week, up 14.1% on average.
  • Summer 22 gas dropped 0.7% to £180.00/MWh, while winter 22 peak power contract increased 16.2% to £209.25/MWh.
Commodity price movements

Oil and Coal

 

Carbon

  • Brent crude prices recorded further gains this week, a consistent trend with much of the start of 2022. Brent crude prices averaged $98.46/bl this week, 5.6% higher than the previous week. This also included a fresh seven-year high on Thursday 24 February at $105.06/bl.
  • More specifically this week, prices gained strong momentum from news that Russia has invaded Ukraine, with news breaking in the UK early Thursday morning.
  • Should oil sanctions be imposed as some economies have suggested, we could see further tightening of an already restricted Brent crude supply market, exacerbating price rises.
  • Carbon prices saw collective increases from the week prior. The UK ETS increased 1.2% to average £85.23/t, with the EU ETS climbing too, up 0.4% to average €89.45/t.
  • Impending colder weather and lowering wind outturn will likely place increased emphasis on gas-fired plant to meet demand and drive up the demand for EUA’s to cover carbon emissions.
  • Elsewhere compliance buying ahead of the 2021 reporting period for some generators has lent bullish price support too.
Wholesale price snapshot 

 

Posted by TEAM on 25 February 2022