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Energy Wholesale Market Review, 26 October 2018

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This week, wholesale power and gas, and commodity markets experienced mixed movements, with month-ahead gas contracts hitting 11-week lows as high LNG send-out is expected to continue into November with several cargoes contracted to 7 November. Both baseload and peak power contracts experienced mixed movements, with the majority of near-term contracts out to winter 19 falling. The day-ahead contract was the exception, rising as reduced wind output and lower temperatures tightened supply and demand fundamentals. Contracts further along the curve, beyond summer 20, rose week-on-week, following their gas counterparts higher. All gas contracts out to and including winter 19 fell this week. Day-ahead gas decreased 2.9% to end the week at 66.1p/th, following many LNG deliveries in the previous week and several cargoes contracted for next week. This is despite temperatures forecasted to fall below seasonal-normal levels and signals a healthy market. The weekly average Brent crude oil price fell for a third week, dropping 3.8% to average $77.3/bl, down from $80.4/bl the previous week. Oil prices dropped as Saudi Arabia has warned of oversupply in the market this year following the announcement that the nation would increase production to 11.0mn bpd. API 2 coal prices recovered from the previous two weeks of decline, rising 1.3% to average $97.7/t. EU ETS carbon prices slipped 0.5% to average €19.0/t, continuing to remain below €20.0/t throughout the week, with prices dropping as low as €18.3/t on 23 October.

Baseload electricity
Day-ahead power rose 3.6% to £66.7/MWh. Prices started the week at £61.3/MWh, the lowest since 18 August, amid forecasts of higher wind generation. November 18 power fell to a multi-month low, dropping 4.8% to £64.8/MWh.		Annual April 19 power decreased 1.0% to £59.9/MWh. The contract is £2.6/MWh (4.2%) lower than the same period last month, and 38.6% above the same time last year when it was £43.2/MWh.
Forward curve comparison		Annual October Contract

Peak electricity
Day-ahead peak power increased 8.0% week-on-week to £74.0/MWh. This was £7.3/MWh above its baseload counterpart. Month-ahead peak power went down 4.4% to end the week at £72.5/MWh, remaining £7.7/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power went down 0.9% to £65.6/MWh. The contract remains £5.7/MWh above its baseload power counterpart. The contract was 4.4% below its price last month (£68.6/MWh) and 33.4% higher than its value last year (£49.2/MWh).
Forward curve comparison		Annual October Contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal contracts were up 0.8% on average. Summer and winter 19 fell 1.7% and 0.2% to £57.0/MWh and £62.7/MWh respectively. Summer 20 power was up 3.2% to £51.9/MWh.		Most seasonal peak power contracts increased this week, up 0.8% on average. Prices followed their gas counterparts; however seasonal gas contracts fell 0.4% on average.

Commodity price movements
Oil and Coal		Carbon
The weekly average Brent crude oil price fell for a third week, dropping 3.8% to average $77.3/bl, down from $80.4/bl the previous week. Oil prices dropped to $75.2/bl on 24 October, the lowest since August, as Saudi Arabia has warned of oversupply in the market this year following the announcement that the nation would increase production to 11.0mn bpd ahead of the Iranian sanctions coming into effect on 5 November. API 2 coal prices recovered from the previous two weeks of decline, rising 1.3% to average $97.7/t. This week, it was announced that Chinese coal output from its top producing region, Inner Mongolia, was up 11.1% between Q118 and Q318, with output at 673.3mn tonnes in September.		EU ETS carbon prices slipped 0.5% to average €19.0/t, continuing to remain below €20.0/t throughout the week. Prices dropped as low as €18.3/t on 23 October. With German auctions postponed from mid-November until Q119, the loss of nearly 22mn EUAs from auction volumes could see carbon prices back above €20.0/t in the coming weeks. However, uncertainty over Brexit continues to impact prices and may outweigh support from lower EUA volumes.

Wholesale price snapshot