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Energy Wholesale Market Review, 5 April 2019

Headlines

Wholesale power and gas contracts reversed recent trends and moved higher this week. Despite the arrival of seven LNG tankers during the first week of April, the gas system was undersupplied on Friday following a drop in flows from Norway. All baseload power contracts rose week-on-week, following gas counterparts up, while weaker wind generation also supported near-term contracts. A recovering EU ETS carbon market also drove prices up, gaining 5.6% to average €22.8/t. Day-ahead power was up 5.4% to end the week at £44.3/MWh. Earlier in the week the contract fell to a fresh 20-month low of £39.7/MWh. All seasonal power contracts rose, gaining 6.3% on average. All gas contracts rose week-on-week, as cooler temperatures lifted gas demand and an unexplained drop in flows from Norway on Friday led to an undersupplied system. Day-ahead gas increased 7.9% to end the week at a 38.1p/th. The contract had fallen to a fresh 22-month low of 31.5p/th on 3 April as the gas system was oversupplied following an influx of LNG tankers. All seasonal gas contracts went up, rising 6.8% on average, following Brent crude oil prices higher which gained 2.5% to average $69.2/bl. Oil prices found support from news that OPEC production cuts had taken the group’s output to a four-year low in March, with further support from waning Venezuelan production amid US sanctions and power outages. API 2 coal prices fell 4.3% to average $70.8/t, dropping to $68.0/t on 3 April, a 22-month low.

Baseload electricity
Day-ahead power rose 5.4% to £44.3/MWh. Earlier in the week the contract fell to a fresh 20-month low of £39.7/MWh. May and June 19 power contracts gained 8.3% and 8.9% to £45.0/MWh and £46.0/MWh, respectively.		Annual October 19 power increased 8.5% week-on-week to £53.8/MWh. The contract is 1.1% above the same time last month (£53.3/MWh).
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power increased 9.6% to £46.6/MWh, £6.9/MWh above its baseload counterpart. Day-ahead peak power is 10.6% lower than the same time last year when it was £52.2/MWh. May and June 19 peak power gained 6.7% and 8.8% to £47.9/MWh and £50.5/MWh, respectively.		Annual October 19 peak power lifted 7.4% to £59.2/MWh, £5.4/MWh above its baseload power counterpart. The contract is unchanged from last month, but 20.3% higher than its value last year (£49.2/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal power contracts rose 6.3% on average. Winter 19 power climbed 8.7% to £58.2/MWh, up 0.5% from the same time last month when it was £58.0/MWh.		Seasonal peak power contracts rose 5.4% on average. The Winter 19 peak contract was up 7.5% at £64.9/MWh.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil prices rose 2.5% to average $69.2/bl. Oil prices found support from news that OPEC production cuts had taken the group’s output to a four-year low in March. Tighter supplies outweighed news this week that US crude production reached a record 12.2mn bpd. Reports of positive outcomes in the previous week’s trade talks between the US and China also boosted sentiment, with the US government saying that negotiations were “candid and constructive”. API 2 coal prices fell 4.3% to average $70.8/t, dropping to $68.0/t on 3 April, a 22-month low. Coal demand in Asia continues to fall, with Chinese coal imports down from 2.0mn tonnes in January to 1.3mn tonnes in March.		EU ETS carbon prices increased 5.6% to average €22.8/t. Within-day carbon prices peaked at €24.8/t on 4 April, the highest since 24 January. Carbon prices were supported this week amid expectations that a no-deal Brexit was increasingly less likely and would keep the UK in the EU ETS until 2021 as part of a transitional period. Analysts have speculated that this week’s bullish momentum in carbon prices is unsustainable. With gas prices remaining near two-year lows and NW European gas stocks relatively comfortable, coal-fired power generation will act as a marginal power supply.

Wholesale price snapshot