Energy Wholesale Market Review, 8 April 2022

Headlines

The majority of gas and power contracts retreated week-on-week, with the predominant bearish movements seen across near-term contracts, but with gains seen further out on the forward curve – a potential consequence of risk premimums being baked into longer-dated contracts as global wholesale energy supply disruption concerns continue in the wake of the war in Ukraine. Furthermore, day-ahead gas fell 19.8% to 239.00p/th, indicative of the on-going volatility across the wholesale gas landscape, with specific bearish drivers this week including periods of system oversupply. Day-ahead power declined 18.4% to £200.00/MWh, mirroring bearish trends set from its gas counterpart contract. These bearish fundamentals filtered into front-month contracts too, with May 22 gas down 18.8% at 242.11p/th, and June 22 gas decreased 16.9% to 250.80p/th. However, most seasonal gas contracts boosted this week, up by 31.5% on average, while winter 22 gas dropped 14.4% to 254.65p/th, while summer 23 gas increased 79.5% to 268.10p/th. In a similar vain, seasonal power contracts saw gains this week, up on average by 7.5%, as winter 22 power decreased 8.5% to £238.00/MWh, while summer 23 expanded 8.9% to £152.50/MWh.

Baseload electricity
  • Day-ahead power fell 18.4% to £200.00/MWh, following losses observed in near-term gas contracts and periods of higher wind outturn in the week.
  • May 22 power slipped 14.5% at £213.00/MWh and June 22 power decreased 12.3% to £222.00/MWh.
  • Q3-22 power moved 8.5% lower to £238.00/MWh.
  • The annual October 22 contract lost 2.4% to £195.25/MWh, 267.5% higher than the same time last year (£53.13/MWh).
Forward Curve Comparison

 

Annual April Contract

Peak electricity
  • Day-ahead peak power was down 15.7% to £215.00/MWh, following baseload power lower.
  • May 22 peak power declined 16.0% at £222.50/MWh, and June 22 peak power decreased 13.9% to £230.80/MWh.
  • The annual October 22 peak power rose 2.3% to £224.35/MWh
  • This is 270.3% higher than the same time last year (60.58/MWh).

Forward curve comparison

 

Annual April contract

 

Seasonal power prices

Seasonal baseload power contracts

 

 

Seasonal baseload power curve

 

 

  • The majority of seasonal power contracts boosted this week, up on average by 7.5%.
  • Summer 23 expanded 8.9% to £152.50/MWh and winter 23 rose 7.0% to 153.00p/th.
  • Most seasonal peak power contracts boosted this week, up 12.7% on average.
  • Summer 23 peak power increased 19.2% to £169.30/MWh whilst the winter 23 contract lifted 11.9% to 166.71p/th.
Commodity price movements
 

Oil and Coal

 

Carbon

  • Brent crude prices fell week-on-week, a second consecutive week of decline, subsequently falling 5.6% to average $104.82/bl.
  • There were numerous fundamentals influencing the trajectory of Brent crude prices this week, but with the most prevalent drivers having a suppressive impact on prices overall.
  • The US and other IEA member nations orchestrated the release of strategic crude reserves to help soften some of the on-going market tightness, easing supply fear sentiment – expected to equate to approximately 120mn barrels over the next six months.
  • Carbon markets experienced collective decline from the previous week. The UK ETS fell 2.3% to average £74.56/t, with the EU ETS sharing a similar week-on-week decline, down 4.9% to average £75.35/t.
  • For the UK ETS more specifically, higher wind outturn and cooler weather across the last seven days prompted higher demand via gas-fired assets, increasing the demand for EUA’s in turn. Similarly, the continuation of elevated gas prices, has increased the levels of gas-to-coal switching, bumping up demand for EUA’s too.
Wholesale price snapshot 

 

Posted by TEAM on 8 April 2022