Energy Wholesale Market Review, 4 February 2022

Headlines

This week was saw a largely bearish sentiment across GB gas and power contracts. The most pronounced week-on-week losses were obserbed in near-term contracts, due to easing pressures on system fundamentals in the week. Subsequently, day-ahead gas fell 14.2% to 188.00p/th, following periods of stronger Norwegian imports and increased LNG cargo deliveries to the UK, softening the ongoing tight gas supply landscape. Day-ahead power fell too, down 7.2% to £168.00/MWh, mirroring the largely bearish direction of near-term gas contracts. This was exacerbated by periods of stronger wind generation in tandem. As a result, March 22 gas was down 12.0% at 196.24p/th, and April 22 gas decreased 9.7% to 194.78p/th. Most seasonal gas contracts declined this week, down by 2.8% on average. Both summer 22 and winter 22 gas dropped 9.4% and 9.6% respectively, subsiding to 194.85p/th and 202.53p/th. On the contrary, most seasonal power contracts boosted this week, up on average by 3.7%, as summer 22 power increased 6.7% to £183.75/MWh, and winter 23 lifted 5.9% to £125.00/MWh.

Baseload electricity
  • Day-ahead power fell 7.2% to £168.00/MWh, following near-term gas contracts lower, exacerbated by periods of stronger wind generation in tandem.
  • March 22 power slipped 13.5% to £182.50/MWh and April 22 power decreased 7.6% to £188.00/MWh.
  • Q222 power moved 6.1% lower to £185.00/MWh.
  • The annual April 22 contract lost 5.3% to £189.38/MWh, but was 265.0% higher than the same time last year (£51.88/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power slid 40.7% to £178.00/MWh, following its baseload counterpart lower with forecasts or more comfortable supply margins.
  • March 22 peak power declined 17.0% at £195.00/MWh, and April 22 peak power decreased 15.8% to £185.00/MWh.
  • The annual April 22 peak power contract rose 16.1% to £209.00/MWh.
  • This was 258.3% higher than the same time last year (58.33/MWh).

Forward curve comparison

 

Annual April contract

 

Seasonal power prices

Seasonal baseload power contracts

 

Seasonal baseload power curve

 

  • Most seasonal power contracts boosted this week, up on average by 3.7%.
  • Summer 23 power increased 7.2% to £119.00/MWh, while summer 24 lifted 16.2% to £92.00/MWh.
  • All seasonal peak power contracts boosted this week, up 22.1% on average.
  • Summer 22 and winter 22 peak power increased 21.9% and 11.5% respectively, lifting to £195.00/MWh and £223.00/MWh.
Commodity price movements

Oil and Coal

 

Carbon

  • Brent crude prices climbed again this week, up 1.4% to average $90.06/bl, including a fresh seven-year high on 4 February at $92.57/bl.
  • Prices this week continued to find bullish price support through ongoing market tightness.
  • Geopolitical tension between the Ukraine and Russia continued, and the threat of supply disruption from Russia has exacerbated future supply concerns.
  • However, bullish momentum from the Ukrainian and Russian conflict was partially offset by OPEC+ confirming they are looking to stick to their planned output rises.
  • Carbon prices saw collective increase from the week prior. The UK ETS lifted, up 3.0% to £84.85/t, while the EU ETS gained 4.3% to average €91.68/t.
  • The UK ETS broke record highs since the scheme’s inception in May 2021 on multiple days, with the latest high sitting at £86.75/t, aided by elevated gas prices prompting gas to coal switching, partly driven by the on-going Russian gas supply concerns.
Wholesale price snapshot 

 

Posted by TEAM on 7 February 2022