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Energy Wholesale Market Review, 8 January 2021

Headlines

Most power and gas contracts continue to follow bullish trends as observed prior to the Christmas break. Day-ahead power rose 6.6% to £68.25/MWh, finding support from tight supply margins, amid periods of low generation availability and high demand, with two Electricity Margin Notice (EMN) issued in the week on Wednesday and Friday. Day-ahead gas rose 8.3% to 61.75p/th, benefitting from the continued period of colder weather across the UK and much of North-West Europe, although this is set to subside next week. February 21 gas was up 7.2% at 60.82p/th, and March 21 gas increased 6.0% to 55.64p/th. Most seasonal gas contracts rose last week, up by 0.7% on average, with summer 21 and winter 21 gas increasing 2.6% and 2.3% respectively, lifting to 43.59p/th and 51.49p/th. Most seasonal power contracts also saw growth, rising by 1.7%, as summer 21 and winter 21 expanded 2.6% and 2.6% respectively, to £53.16/MWh and £59.00/MWh. Brent crude oil resumed gains last week, averaging $53.45/bl last week. Prices reached a near 11-month high on Friday at $54.74/bl. The Brent crude price lifted on supply cut pledges from Saudi Arabia, to combat market oversupply and demand concerns. EU ETS carbon climbed for the eighth consecutive week, rising 4.1% to average €34.02/t last week. Carbon prices were almost 17% higher than the same time last month. Prices on 8 January reached a new all-time high at €34.83/t. Prices continued to find support from ambitious climate targets made by the EU with a tighter carbon market expected as a result.

Baseload electricity
Day-ahead power rose 6.6% to £68.25/MWh, following continued trends of tight supply margins. February 21 power climbed 7.0% at £70.61/MWh and March 21 power increased 5.1% to £62.03/MWh.		Q221 power moved 9.4% higher to £54.15/MWh. The annual April 21 contract rose 2.6% to £56.08/MWh, 19.5% higher than the same time last year (£46.94/MWh).
Forward curve comparison		Annual April Contract
Peak electricity
Day-ahead peak power was up 3.8% to £75.50/MWh, following its baseload counterpart higher. February 21 peak power gained 2.5% at £81.52/MWh, and March 21 peak power increased 2.1% to £65.31/MWh.		The annual April 21 peak power lost 2.1% to £61.62/MWh. This is 15.7% lower than the same time last year (53.27/MWh).
Forward curve comparison		Annual April contract
Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
The majority of seasonal power contracts increased this week, up on average by 1.7%. Summer 21 and winter 21 expanded 2.6% and 2.6% respectively, rising to £53.16/MWh and £59.00/MWh.		Most seasonal peak power contracts boosted this week, up 1.3% on average. Summer 21 and winter 21 peak power increased 1.7% and 2.5% respectively, falling to £57.02/MWh and £66.22/MWh.
Commodity price movements
Oil and Coal		Carbon
Brent crude oil resumed gains last week, as observed towards the end of December, averaging $53.45/bl last week. Prices reached a near 11-month high on Friday at $54.74/bl. The Brent crude price found support from supply cut pledges from Saudi Arabia, to combat market oversupply and demand concerns as many major economies enter periods of tougher lockdown restrictions to combat the spiral in cases from coronavirus. Further gains were suppressed by the news that COVID-19 infection rates have risen sharply in recent weeks with the emergence of a new strain of the virus. API 2 coal fell 2.1% from the previous week to average $68.04/t.		EU ETS carbon climbed for the eighth consecutive week, rising 4.1% to average €34.02/t last week. Carbon prices were almost 17% higher than the same time last month. Prices on 8 January reached a new all-time high at €34.83/t. Prices continued to find support from ambitious climate targets made by the EU with a tighter carbon market expected as a result. The UK left the EU ETS scheme on 1 January 2021, but the government has confirmed the implementation of a replacement UK ETS, potentially linked to the EU ETS, with auctions to start no later than Q2 2021. UK emitters are still required to comply with their 2020 emissions under the EU ETS, with a deadline to surrender allowances on 30 April 2021.
Wholesale price snapshot