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Energy Wholesale Market Review, 30 August 2019

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Wholesale power and gas contracts experienced mixed movements. Both day-ahead power and gas were down, falling 4.3% and 5.1% to £39.3/MWh and 27.8p/th respectively. The contracts were supported by periods of higher wind generation and comfortable gas supplies. The scheduled arrival of two LNG tankers from Qatar early in September has also pressured prices, with supplies expected to remain comfortable despite maintenance reducing gas flows from Norway throughout the month. On average, seasonal gas and power contracts moved lower, down 0.6% and 0.1% respectively. Although the winter 19 contract for both power and gas were higher week-on-week, winter 19 power hit a 15-month low of £51.5/MWh on 27 August and winter 19 gas hit a two-year low of 45.9p/th on 28 August. Brent crude oil was up 0.4% to average $60.2/bl, supported by news of another weekly decline in the amount of oil held in US inventories. API 2 coal prices fell further, down 0.6% to average $63.6/t. Coal prices dropped to $63.1/t on 28 August, the lowest since 19 June. Demand for coal in Europe will remain weak in September as cheaper gas continues to drive coal out of the generation mix. EU ETS carbon prices averaged €26.0/t, down 1.2% from the previous week. Carbon prices ended the week at €26.8/t, a 10-day high. Prices found support from halved auction volumes in August, while an optimistic outlook for US-China trade talks resuming provided.

Baseload electricity
Day-ahead power was down 4.3% to £39.3/MWh, pressured by periods of higher wind generation and a drop in day-ahead gas prices. September 19 power slipped 0.3% to £40.7/MWh. October 19 power gained 2.0% to £42.6/MWh.		Annual October 19 power was unchanged at £50.0/MWh. The contract is 7.0% below the same time last month (£53.7/MWh), and 13.7% lower than the same time last year (£57.9/MWh).
Forward curve comparison		Annual October Contract
Peak electricity
Day-ahead peak power was down 0.6% to £42.0/MWh, £2.7/MWh above its baseload counterpart. September 19 peak power lost 1.2% to £43.5/MWh. October 19 peak power was 1.8% higher at £47.6/MWh.		Annual October 19 peak power was up 0.2% at £55.6/MWh, remaining £5.6/MWh above its baseload power counterpart. The contract is 6.0% below its value this time last month (£59.1/MWh), and 12.7% below the same time last year when it was £63.7/MWh.
Forward curve comparison		Annual October contract
Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal baseload power contracts were down 0.1% on average. Winter 19 power climbed 0.9% to £52.6/MWh, while summer 20 power fell by 0.9% to £47.4/MWh.		Seasonal peak power contracts were up 0.2% on average. Winter 19 peak power increased 0.7% to £59.2/MWh.
Commodity price movements
Oil and Coal		Carbon
Brent crude oil was up 0.4%, averaging $60.2/bl. Oil prices were supported by news of another weekly decline in US crude stocks, which fell by over 10mn barrels. US bank Morgan Stanley lowered its oil price forecasts for the remainder of 2019, down to $60/bl from $65/bl. The bank cited a weaker global economic outlook, lower oil demand and growing US supplies as the main drivers for the reduction. API 2 coal prices fell 0.6% to $63.6/t, dropping to $63.1/t on 28 August, the lowest since 19 June. According to BEIS data, UK generators imported 3.9mt of coal in H119, a 19% reduction from H118. However, with generators burning only 1.5mt of coal in H119, a 60% reduction y-o-y, stocks at plants in June 2019 reached their highest levels since November 2017 at 4.7mt.		EU ETS carbon prices averaged €26.0/t, down 1.2% from the previous week. Carbon prices ended the week at €26.8/t, a 10-day high. Prices found support from halved auction volumes in August, while an optimistic outlook for US-China trade talks resuming provided uplift for the wider energy complex, feeding through to carbon prices. The return of normal auction volumes in September will provide downwards pressure to prices, with auction volumes up 24% this week from last week. However, the forecast of weaker renewables generation and temperatures well below seasonal normal levels in Germany will see a rise in coal-fired power generation, and therefore greater demand for EUAs at auctions this week.
Wholesale price snaphot