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Energy Wholesale Market Review, 29 March 2019

Headlines

All near-term (up to and including summer 19) power and gas contracts fell this week as gas supplies are forecast to remain comfortable as we move into summer, whilst several LNG tankers are scheduled to arrive in the first week of April. All near-term baseload power contracts, up to and including summer 19, fell week-on-week. Day-ahead power was down 4.5% to end the week at £42.0/MWh, a fresh 18-month low. Nearly all seasonal power contracts rose, gaining 1.4% on average. Summer 19 power was the exception, down 1.8% to £42.8/MWh, a near one-year low. Day-ahead gas dropped 4.3% to end the week at a 35.3p/th, a fresh 20-month low despite forecasts of cooler temperatures early next week. Most seasonal gas contracts rose, up 0.9% on average. Summer 19 gas was the exception, dropping 3.7% to 35.5p/th, the lowest since June 2016. Brent crude oil prices averaged $67.5/bl this week, relatively unchanged from the previous week. Rising US production continues to be offset by concerns of a tightening market amid OPEC+ production cuts, as pressure from the US-China trade war and worries of slowing economic growth are also not enough to cap gains. EU ETS carbon prices lifted slightly, up 1.5% to average €21.6/t. Within-day carbon prices rose above €22.3/t at the end of the week, a two-week high. API 2 coal prices went up for the first time in four weeks, rising 0.6% to average $73.9/t. Within-day prices rose to a two-week high of $75.3/t in the middle of the week but ended at a seven-week low of $72.0/t.

Baseload electricity
Day-ahead power was down 4.5% at £42.0/MWh, a fresh 18-month low, following gas prices lower. The April and May 19 power contracts were down 1.6% and 2.0% to £42.4/MWh and £41.6/MWh, respectively.		Annual April-19 power was down 0.7% week-on-week, falling to £48.2/MWh. The contract is 9.9% below the same time last month (£53.5/MWh).
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power decreased 6.4% to £42.5/MWh, just £0.5/MWh above its baseload counterpart. Day-ahead peak power is 16.7% lower than the same time last year when it was £51.0/MWh. April and May 19 peak power fell 1.2% and 1.7% to £45.4/MWh and £44.9/MWh, respectively.		Annual April 19 peak power slipped 0.5% to £53.5/MWh, remaining £5.3/MWh above its baseload power counterpart. The contract is 9.1% below its price last month (£58.9/MWh), but 4.2% higher than its value last year (£51.3/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Nearly all seasonal power contracts rose, gaining 1.4% on average. Summer 19 power was the exception, down 1.8% to £42.8/MWh, a near one-year low.		Seasonal peak power contracts experienced mixed movements, up 0.2% on average. The summer 19 peak contract was down 1.4% at £46.6/MWh, whilst winter 19 peak power gained 0.2% to £60.4/MWh.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil prices averaged $67.5/bl this week, relatively unchanged from the previous week. Brent crude oil prices experienced their biggest quarterly rise since 2009, with prices up ~27% from the start of the year. The price spike led US President Donald Trump to call for OPEC to increase oil production in a tweet on 28 March suggesting that “World Markets are fragile” and that the “price of Oil [is] getting too high.” Although the initial response in the market saw within-day Brent crude oil prices lose $1.0/bl, prices recovered to end the week above $68.6/bl. API 2 coal prices went up for the first time in four weeks, rising 0.6% to average $73.9/t. Within-day prices rose to a two-week high of $75.3/t in the middle of the week but ended at a seven-week low of $72.0/t.		EU ETS carbon prices lifted slightly, up 1.5% to average €21.6/t. Within-day carbon prices rose above €22.3/t at the end of the week, a two-week high. Carbon prices have been supported by “technical buying”, as according to traders, there is little reason for recent upwards momentum. Carbon prices were expected to remain relatively flat amid warm weather and lower energy demand keeping coal-fired power plant generation minimal, and uncertainty around Brexit also pressuring prices.

Wholesale price snapshot