Energy Wholesale Market Review, 29 July 2022

Headlines

The majority of gas and power contracts reported gains this week. Day-ahead gas grew 9.2% to 308.0p/th, finding continued price support from disruption to European supply via the Nord Stream 1 pipeline, while also being bolstered by higher gas-for-power demand. August 22 gas lost 2.0% to 315.0p/th, while September 22 gas traded 3.7% higher at 372.8p/th. Amid ongoing volatility, seasonal gas contracts continued their recent bullish momentum, increasing by an average of 9.2% week-on-week. Following its gas counterpart, day-ahead power climbed 32.8% to £310.0/MWh, being buoyed further by low wind output mid-week. August 22 power rose 2.7% to £300.0/MWh, and September 22 power went up 1.4% to £355.0/MWh. Further along the forward curve, seasonal power contracts increased by 11.7% on average this week with the summer 24 contract reporting the greatest price increase, up 18.1% to £215.0/MWh. Brent crude oil gained 2.5% to average $106.68/bl amid ongoing tight supply concerns. EU ETS carbon lost 4.6% to average €77.70/t and UK ETS carbon slipped 5.2% to average £77.24/t.

Baseload electricity
  • Day-ahead power jumped 32.8% to £310.0/MWh, supported by a mixture of low wind generation, strong exports to France and continued high gas prices.
  • August 22 power went up 2.7% to £300.0/MWh and September 22 power rose 1.4% to £355.0/MWh.
  • The annual October 22 contract raised 11.7% to £406.5/MWh. This represents a 551.7% increase on the price point observed this time last year (£62.4/MWh).
Forward Curve Comparison

 

Annual October Contract

Peak electricity
  • Day-ahead peak power reversed the losses observed in the previous week, rising 43.8% to £345.0/MWh, following its baseload counterpart higher.
  • August 22 peak power gained 1.7% to £320.0/MWh, while September 22 peak power fell 5.7% to £353.8/MWh.
  • The annual October 22 peak power eased 6.9% to £392.5/MWh.
  • Despite the losses, the price remains 531.5% higher than the same time last year (£62.5/MWh).

Forward curve comparison

 

Annual October contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

 

  • All tracked seasonal power contracts experienced gains this week, up on average by 11.7%.
  • Winter 22 rose to a fresh high of £540.0/MWh (up 13.0%). Summer 23 also saw gains, rising 9.2% to £273.0/MWh.
  • Seasonal peak power contracts saw mixed movements this week, falling 3.2% on average.
  • Winter 22 gas lost 6.7% to £530.0/MWh, while summer 23 peak power declined 7.4% to £255.0/MWh.
Commodity price movements
 

Oil and Coal

 

Carbon

  • Brent crude oil gained 2.5% to average $106.68/bl amid ongoing tight supply concerns, with speculation that OPEC+ members will decide to not boost supply at next week’s meeting.
  • News of the US Federal Reserve’s further increase in interest rates lent further support, with market participants concerned fuel demand may be weakened if interest rate rises are too aggressive.
  • Gains were pegged back by the news that Libyan oil production is expected to increase in the coming two weeks to 1.2mn barrels per day, up from 860,000 barrels per day.
  • API 2 coal dropped 8.7% to average $261.40/t.
  • EU ETS carbon lost 4.6% to average €77.70/t and UK ETS carbon slipped 5.2% to average £77.24/t, following news of EU nations agreeing to a 15.0% reduction in gas demand as part of emergence regulation for the coming winter season.
  • Towards the end of the week EU ETS prices did find some support from the anticipation of a halving of auction volumes in August.
Wholesale price snapshot 

 

Posted by TEAM on 1 August 2022