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Energy Wholesale Market Review, 28 June 2019

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The majority of wholesale power and gas contracts fell week-on-week, as above seasonal normal temperatures caused by winds from the Sahara, led to weaker demand for gas, whilst power prices were pressured by an uptick in wind generation. Amid the record-breaking temperatures, day-ahead gas dropped to a two-year low of 25.2p/th on 26 June, whilst winter 19 gas was 2.1% lower, ending the week at 49.8p/th, the first time the contract has been below 50p/th since April 2018. Most power contracts followed their gas counterparts lower despite a 5.9% increase in EU ETS carbon prices. The day-ahead contract was 5.0% lower at £36.1/MWh, a near one-month low. On average, seasonal baseload power contracts were up 0.7% week-on-week, with both summer 20 and winter 20 rising by 0.8% to end the week at £48.4/MWh and £56.1/MWh, respectively. Brent crude oil rose for a fourth consecutive week, up by 5.2% to average $65.7/bl, supported by expectations that OPEC will agree to extend current production cuts into H219 at its meeting on 1-2 July and optimism over US-China trade talks at the G20 summit in Japan. API 2 coal prices reversed recent downward movements, up 1.9% to average $64.3/t. EU ETS carbon prices recovered further last week, rising 5.9% to average €26.5/t. EUAs peaked at €27.5/t on 26 June, a fresh two-month high and approaching April’s 11-year high of €27.8/t.

Baseload electricity
The day-ahead contract was 5.0% lower at £36.1/MWh, a near one-month low. Day-ahead power is 30.8% lower than the same time last year (£52.2/MWh). Month-ahead (July) power fell 2.5% to end the week at £36.8/MWh.		Annual October 19 power rose slightly, up 0.1% week-on-week to £51.8/MWh. The contract is 1.2% lower than the same time last month (£52.4/MWh), but 2.1% higher than the same time last year (£50.8/MWh).
Forward curve comparison		Annual October Contract

Peak electricty
Day-ahead peak power dropped 7.5% to £38.0/MWh, £1.9/MWh above its baseload counterpart. Day-ahead peak power is 33.0% lower than the same time last year when it was £56.8/MWh. July 19 peak power decreased 2.1% to end the week at £40.6/MWh.		Annual October 19 peak power slipped 0.2% to £57.5/MWh, £5.7/MWh above its baseload power counterpart. The contract is 1.5% below its value this time last month (£58.3/MWh), and 1.2% above the same time last year when it was £56.8/MWh.
Forward curve comparison		Annual October contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
On average, seasonal baseload power contracts were up 0.7%, mirroring their gas counterparts. Both summer 20 and winter 20 rose by 0.8% to £48.4/MWh and £56.1/MWh, respectively. However, winter 19 power was slightly lower, down 0.5% at £55.2/MWh.		Seasonal peak power contracts experienced mixed movements, with winter 19 and 20 moving lower, whilst summer 20 and 21 rose. Winter 19 peak power slipped 1.0% to £61.8/MWh, whilst summer 20 peak power lifted 0.7% to £53.1/MWh.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil rose for a fourth consecutive week, up by 5.2% to average $65.7/bl. Prices were supported towards the end of the week by anticipation that the G20 summit in Japan would see a continuation of previously collapsed trade talks between the US and China. This, in combination with expectations that OPEC will agree to extend production cuts into the second half of the year at its meeting on 1-2 July, pushed prices to $66.8/bl, a fresh one-month high. API 2 coal prices reversed recent downward movements, up 1.9% to average $64.3/t. Coal prices recovered slightly last week following an uptick in demand due to record high temperatures across Europe, which led to higher cooling demand.		EU ETS carbon prices recovered further, rising 5.9% to average €26.5/t. EUAs peaked at €27.5/t on 26 June, a fresh two-month high and approaching April’s 11-year high of €27.8/t. Carbon prices were supported by a combination of lower auction volumes and a heatwave across Europe. The heatwave led to a rise in cooling-demand, some of which was met by thermal generation and therefore increased demand for EUAs. Despite the recent recovery in EU ETS carbon prices, some analysts are cutting forecasts for the remainder of 2019. Energy Aspects have reportedly cut Q319 and Q419 average predictions to €24.3/t and €27.3/t respectively, as the risk of a no-deal Brexit continues to loom.
Wholesale price snaphot