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Energy Wholesale Market Review, 8 March 2019

Headlines

Nearly all wholesale power and gas contracts fell week-on-week. Whilst day-ahead power was unchanged at £48.0/MWh, day-ahead gas dropped to fresh 17-month lows as comfortable gas supplies and mild temperatures continued in early March. Gas prices were further pressured by a slip in Brent crude oil prices. Nearly all near-term baseload power contracts fell week-on-week, although day-ahead power was an exception, remaining at £48.0/MWh. Most seasonal power contracts reversed the previous week’s gains, dropping 0.2% on average. Whilst the summer and winter 19 contracts fell to £48.2/MWh and £58.0/MWh, respectively, summer and winter 20 power both rose from the previous week, up 0.2% and 0.5% to £48.6/MWh and £55.4/MWh, respectively. Near-term gas prices have continued to be pressured by comfortable gas supplies amid the arrival of several LNG tankers, above seasonal normal temperatures, and strong supplies from the UKCS and Norway. Day-ahead gas dropped 3.3% to end the week at 42.8p/th, with the contract dropping to a fresh 17-month low of 42.6p/th on 7 March. Seasonal gas contracts decreased 2.3% on average. Brent crude oil fell for a second consecutive week, slipping 0.4% to average $65.8/bl. Oil prices continue to fluctuate in response to OPEC+ production cuts creating a tighter market, and rising US crude production which is easing the impact of OPEC’s cuts. API 2 coal prices fell for the first time in three weeks, down 1.0% to average $78.7/t. EU ETS carbon prices rose 12.5% to average €22.8/t.

Baseload electricity
Day-ahead power remained unchanged £48.0/MWh. The contract dropped to an 11-month low of £46.9/MWh on 6 March, amid forecasts of higher wind. The April and May 19 power contracts were down 0.6% and 0.5% to £47.6/MWh and £47.2/MWh, respectively.		Annual April 19 power fell 0.7% to £53.1/MWh. The contract is 5.0% below the same time last month when it was £55.9/MWh, but 19.1% above the same time last year when it was £44.6/MWh.
Forward curve comparison		Annual April Contract

Peak electricity
Day-ahead peak power remained at £51.0/MWh, staying £3.0/MWh above its baseload counterpart. Day-ahead peak power is 9.6% lower than the same time last year when it was £56.4/MWh. Both April and May 19 peak power slipped 1.1% to £50.1/MWh and £50.5/MWh, respectively.		Annual April 19 peak power decreased 0.8% to £58.4/MWh, £5.3/MWh above its baseload power counterpart. The contract was 4.7% below its price last month (£61.3/MWh), but 18.2% higher than its value last year (£49.4/MWh).
Forward curve comparison		Annual April contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Most seasonal power contracts reversed the previous week’s gains, dropping 0.2% on average. Summer and winter 19 contracts fell to £48.2/MWh and £58.0/MWh respectively. Summer and winter 20 power both rose from the previous week, up 0.2% and 0.5% to £48.6/MWh and £55.4/MWh respectively.		Most seasonal peak power contracts went down this week, dropping by 0.3% on average. The summer 19 peak contract was 0.7% lower at £52.0/MWh, £3.8/MWh above its baseload power counterpart.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil fell for a second consecutive week, slipping 0.4% to average $65.8/bl. Oil prices continue to fluctuate in response to OPEC+ production cuts creating a tighter market, and rising US crude production which is easing the impact of OPEC’s cuts. API 2 coal prices fell for the first time in three weeks, down 1.0% to average $78.7/t. Despite coal prices starting the week at a three-week high of $80.8/t, prices ended the week at $76.4/t, the lowest since 18 February. Coal prices have been pressured by weaker demand in the Northern Hemisphere, amid warmer temperatures across Asia and Europe.		EU ETS carbon prices rose 12.5% to average €22.8/t. Within-day carbon prices rose to €23.5/t on 5 March, the highest since 8 February. Traders are suggesting that the recent recovery in EU ETS carbon prices is unsustainable as there are no market signals supporting the commodity, particularly as temperatures remain above seasonal normal temperatures and gas prices across Europe are at multi-month lows. This would suggest that less coal-fired power generation is required as gas-fired power generation remains dominant.

Wholesale price snapshot