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Energy Wholesale Market Review, 7 August 2020

Headlines

Breaking the trend seen in the last two weeks, gas and power contracts in the GB market saw gains this week, as the Bank of England forecasted that the long-term impacts of the coronavirus pandemic might not be as bad as initially thought. The largest movement was seen in the day-ahead gas contract, which rose 47.3% to 19.15p/th following increases in gas-for-power demand forecasts. Day-ahead power fell 1.6% to £34.45/MWh, with strong wind generation over the first half of the week. September 20 gas was up 38.2% at 21.61p/th, and October 20 gas increased 26.3% to 23.85p/th. All seasonal gas contracts increased this week, up by 5.3% on average. Winter 20 and summer 21 gas increased 8.9% and 7.2% respectively, lifting to 34.28p/th and 30.25p/th. Seasonal power contracts gained 3.5% on average. Winter 20 and summer 21 power climbed 5.3% and 5.1% to £47.1/MWh and £41.0/MWh, respectively. Brent crude oil rose 2.0% to average $44.31/bl this week, reaching a near-five month midweek. The decision taken by OPEC+ countries in July to begin easing oil production began to take affect this week, with the oil market initially moving lower at the turn of the month.

Baseload electricity
Day-ahead power fell 1.6% to £34.45/MWh, with high wind generation in the first half of the week. September 20 power climbed 15.7% to £39/MWh and October 20 power increased 11.5% to £39.00/MWh.		Q420 power moved 7.1% higher to £45.00/MWh. The annual October 20 contract rose 5.2% to £44.05/MWh, 15.7% lower than the same time last year (£52.28/MWh).
Forward curve comparison		Annual October Contract
Peak electricity
Day-ahead peak power was up 2.0% to £38.5/MWh opposing the movements in its baseload counterpart. September 20 peak power gained 13.8% to £42.43/MWh, and October 20 peak power increased 4.9% to £43.2/MWh.		The annual October 20 peak power contract lost 5.2% to £49.35/MWh. This is 16.4% lower than the same time last year (59.05/MWh).
Forward curve comparison		Annual October contract
Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
All seasonal power contracts increased this week, up on average by 3.5%. Winter 20 and summer 21 power climbed 5.3% and 5.1% respectively, rising to £47.1/MWh and £41/MWh.		Seasonal peak power contracts were up 3.8% on average, this week. Winter 20 and summer 21 peak power increased 5.0% and 5.4% to £53.8/MWh and £44.89/MWh, respectively.
Commodity price movements
Oil and Coal		Carbon
Brent crude oil rose 2.0% to average $44.31/bl this week, reaching a near-five month midweek. The decision taken by OPEC+ countries in July to begin easing oil production began to take affect this week, with the oil market initially moving lower at the turn of the month. The group of oil producing countries has pledged to ease cuts from 9.7mn to 7.7mn bpd. Directions reversed midweek, as the US EIA announced a large weekly decline of 8.6mn barrels. This announcement saw the Brent price shoot up to a near five-month high of just over $46/bl on 6 August. Despite recent price gains the markets will continue to closely follow COVID-19 developments, with countries such as the US experiencing further rises in the number of cases recorded daily.		API 2 coal prices lifted 0.8% this week to average $59.89/t, with global coal prices boosted by reports of higher Chinese imports. EU ETS carbon gained 2.6% to average €26.51/t, supported by weaker auction supply as the EC withdrew EUA’s at the start of August. Four EU ETS auctions this week saw an average bid-to-cover ratio (ratio of bids to the number of EUA’s available) of 2.02, which is considerably higher than 1.61 average of the auctions in the previous week.
Wholesale price snapshot