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Energy Wholesale Market Review, 4 January 2019

Headlines

Nearly all wholesale power and gas contracts fell week-on-week, with day-ahead peak power the exception, up 1.7% to £68.2/MWh. Day-ahead power fell 0.6% to end the week at £62.1/MWh, amid forecasts of higher wind generation early next week. The new month-ahead (February 19) power contract also dropped, ending the week at £63.9/MWh, whilst March 19 power decreased 1.6% to £61.2/MWh. All seasonal baseload power contracts fell week-on-week, down 3.0% on average. Summer and winter 19 were down 3.4% and 2.7% to £56.0/MWh and £62.1/MWh respectively, both four-week lows. All gas contracts decreased this week, with near-term contracts pressured by above seasonal normal weather at the start of the year. Week-on-week day-ahead gas fell 3.0% to 60.6p/th, 0.6% above the same time last month when it was 60.3p/th. Seasonal gas contracts were down 2.2% on average. Summer and winter 19 gas dropped 3.6% and 2.6% to 53.7p/th and 62.1p/th respectively. Brent crude oil prices slipped from an average of $55.2/bl the previous week to an average of $55.1/bl this week. Prices ended 2018 at $53.8/bl but rose above $57.0/bl by the end of the week as OPEC production cuts began on 1 January. API 2 coal prices dropped 2.6% to average $84.6/t. Coal prices ended the week at $82.6/t, the lowest since 19 April 2018. EU ETS carbon prices curtailed 1.5% to average €24.8/t, down from €25.2/t the previous week, despite there being no auctions scheduled until 7 January.

Baseload electricity
Day-ahead power fell 0.6% week-on-week to £62.1/MWh amid forecasts of high wind generation. February and March 19 power dropped 3.5% and 1.6% to £63.9/MWh and £61.2/MWh respectively.		Annual April 19 power fell 3.0% to £59.1/MWh. The contract is 1.4% above the same time last month when it was £58.3/MWh and 33.4% higher than its value last year (£44.3/MWh).
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power rose 1.7% to £68.2/MWh. This was £6.1/MWh above its baseload counterpart. Month-ahead peak power went down 3.4% to end the week at £71.0/MWh, £8.1/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power fell 3.0% to £64.5/MWh. The contract was £5.4/MWh above its baseload power counterpart. The contract was 1.0% above its price last month (£63.8/MWh) and 29.8% higher than its value last year (£49.7/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
All seasonal baseload power contracts decreased week-on-week, dropping 3.0% on average. Summer and winter 19 fell 3.4% and 2.7% to £56.0/MWh and £62.1/MWh respectively.		All seasonal peak power contracts went down this week, falling 2.6% on average. The summer 19 contract saw the largest change, down 3.3% to £59.9/MWh.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil prices averaged $55.1/bl this week. Prices ended 2018 at $53.8/bl but rose above $57.0/bl by the end of the week as OPEC production cuts began on 1 January. Support for oil prices also came from news on 3 January that the US will hold talks with China to discuss the ongoing trade war between the countries, which is continuing to dampen forecasts for global oil demand growth this year. API 2 coal prices dropped 2.6% to average $84.6/t. Coal prices ended the week at $82.6/t, the lowest since 19 April 2018. The Australian government has issued a report forecasting that coal prices in the region could decline by 30% by 2020 from 2018 average levels.		EU ETS carbon prices curtailed 1.5% to average €24.8/t, down from €25.2/t the previous week, despite no auctions scheduled until 7 January. The introduction of the Market Stability Reserve will result in a 40% reduction in EUA auction volumes from Monday, which combined with the postponement of British carbon auctions, will result in only 38.8mn EUAs being available for auction in January, compared to a 2018 monthly average of 76.6mn EUAs. Next week, EU ETS carbon prices are expected to recover from last week’s decline as auctions resume.

Wholesale price snapshot