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Energy Wholesale Market Review, 5 October 2018

Headlines

Near-term power and gas contracts continued lower this week, whilst seasonal contracts recovered from the previous week’s decline. Week-on-week, day-ahead gas prices dropped 4.3% to 70.1p/th, as the gas system was oversupplied following a pickup in Norwegian flows to the UK. Day-ahead power followed its gas counterpart lower, down 1.3% to end the week at £66.3/MWh. All seasonal gas and power contracts increased week-on-week. Seasonal gas contracts increased 3.9% on average with summer and winter 19 up 3.7% and 3.6% to 65.1p/th and 73.1p/th, respectively. Seasonal power contracts were up 3.8% on average, with summer 19 rising 3.1% to £62.0/MWh, despite starting the week at a four-week low of £56.6/MWh. Brent crude oil prices rose for the seventh consecutive week, gaining 3.8% to average $84.7/bl. Oil hit a fresh four-year high of $86.1/bl on 4 October as the upcoming US sanctions on Iran drive supply uncertainty in the market. API 2 coal rose 1.8% to average $99.4/t this week, hitting a five-year high of $100.2/t on 3 September. Winter restocking in Asia continue to sustain prices at current levels, with reports of falling coal inventories in India expected to support demand in the region. EU ETS carbon prices remained unchanged week-on-week, continuing to average €21.1/t with 23.8mn EUAs auctioned across Europe.

Baseload electricity
Day-ahead power fell 1.3% to £66.3/MWh. Prices started the week down at £63.3/MWh with forecasts of higher wind generation. Both November 18 and December 18 power decreased week-on-week, dropping 1.2% and 0.8% to £70.5/MWh and £71.0/MWh respectively.		The annual April 19 power contract rose 3.6% to end the week at £64.7/MWh (up from £62.5/MWh). The contract is £1.2/MWh (1.9%) higher than the same period last month, and 51.4% above the same time last year when it was £22.0/MWh.
Forward curve comparison		Annual October Contract

Peak electricity
Day-ahead peak power continued to decline, dropping 3.3% week-on-week to £70.1/MWh. This was £3.8/MWh above its baseload counterpart. Month-ahead peak power went down 1.4% to end the week at £78.3/MWh, £7.8/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power went up 3.2% to £70.8/MWh. The contract is £6.1/MWh above its baseload power counterpart. The contract was 2.2% above its price last month (£69.3/MWh) and 44.8% higher than its value last year (£48.9/MWh).
Forward curve comparison		Annual October Contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal contracts were up 3.8% on average. Summer 19 rose 3.1% to £62.0/MWh, despite starting the week at a four-week low of £56.6/MWh. Winter 19 power was up 4.0% to £67.4/MWh.		All seasonal peak power contracts increased last week, up 3.3% on average. Prices followed an increase in gas prices, with seasonal gas prices gaining 3.9% on average.

Commodity price movements
Oil and Coal		Carbon
The weekly average Brent crude oil price rose for the seventh consecutive week, gaining 3.8% to average $84.7/bl, up from $81.6/bl the previous week. Oil hit a fresh four-year high of $86.1/bl on 4 October. However, the announcement by Nigeria’s OPEC representative suggests that OPEC will balance the oil market albeit with little spare capacity. API 2 coal rose 1.8% to average $99.4/t last week, hitting a five-year high of $100.2/t on 3 October. Winter restocking efforts in Asia continue to sustain prices at current levels, with reports of falling coal inventories in India expected to support demand.		EU ETS carbon prices rose averaged €21.1/t. A total of 23.8mn EUAs were up for auction this week. Auction volumes are set to drop by 9.2% to 21.6mn EUAs next week, following allowances from a failed UK auction in September being reauctioned this week. Prices started the week down at €20.8/t but rose throughout the week to €21.3/t on 5 October following a successful German auction of 5.5mn EUAs at €21.1/t. Belgian nuclear power outages could result in higher fossil fuel burning in Europe and push demand for EUAs higher.

Wholesale price snapshot