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Energy Market Review, Monday, 5th March

Headlines for Monday, 5th March

  • Last week saw extraordinary spikes in spot power and gas prices amid cold weather, high demand and numerous gas and power supply outages. National Grid issued a gas deficit warning on Thursday. This was the first time that such a warning had been triggered since it was introduced in 2012. The warning is issued by National Grid if a significant supply or demand event occurs, which represents a material risk to the balance of gas in the NTS. The warning followed multiple gas supply outages, including South Hook LNG terminal, Kollsnes gas processing plant, and the BBL interconnector. This resulted in reduced supplies from Norway and Holland.
  • The end of the week (Friday) saw day-ahead prices (i.e. for delivery on Monday) remain high at 100.0p/th, with forecasts of sustained high demand levels into next week. Spot power prices followed gas prices, with issues exacerbated by power plant outages.
  • Day-ahead baseload power prices reached a one-and-a-half year high of £98.0/MWh on Thursday, before falling to £76.5/MWh on Friday. Within-day power prices climbed to £420/MWh.
  • More notable power plant outages included Sutton Bridge, South Humber Bank, and Pembroke CCGT stations, as well as Torness nuclear plant.
  • In contrast to spot prices, almost all other gas and power contracts declined. Seasonal baseload power prices fell on average by 1.5%, and seasonal gas prices dropped 1.7%.

Brent Crude Oil

Brent crude oil prices grew 0.9% to average $65.8/bl throughout the week. Gains were capped by bearish fundamentals, with the EIA reporting on 1 March that US crude output reached an all-time high of 10.3mn barrels per day and it forecast to increase. A weakening US dollar also limited growth.

API 2 coal

API 2 coal prices fell last week, down 0.8% to average $81.8/t. Prices weakened amid lower demand throughout the market, coupled by lower prices in Asia-Pacific markets.

EU ETS carbon

EU ETS carbon prices grew 2.3% to average €9.9/t last week. On 28 February, prices hit a fresh six-year high of €10.1/t. Support for prices stemmed from the European Council completing the final approval of EU ETS Phase 4 reforms. In addition, a strong Polish EUA auction mid-week boosted prices.

NBP gas

Near-term

With the exception of large rises in the day-ahead contract, most near-term gas contracts experienced losses last week. Day-ahead gas rose 37.0% to 100.0p/th. On 1 March the
contract hit its highest level since at least 2008 at 125p/th. Prices were strengthened by the announcement of a gas deficit warning by National Grid. This came to fruition amid outages at South Hook LNG terminal, Kollsnes gas processing plant and the BBL interconnector. An outage at
the Rough gas storage site on 1 March added additional pressure. The month-ahead (April) contract dropped 2.1% to 47.7p/th last week. The contract is now 5.7% higher than its level last year (45.1p/th).

Seasonal

All seasonal gas contracts declined last week, falling 1.7% on average. Summer 18 gas lost 1.9% to 42.9p/th and the winter 18contract fell 1.6% to 50.5p/th. Annual April 18 Annual April 18 gas slipped 1.7% to 46.7p/th

Baseload power

Near-term

Most near-term baseload power contracts decreased last week. Day-ahead baseload power prices was contrary to other near-term contracts, rising 19.5% to £76.5/MWh. On 1 March prices reached a one-and- a-half year high (£98.0/MWh). This was driven by high levels of demand, as well as outages across numerous CCGT and nuclear plants. The month-ahead (April) contract lost 2.0% to
£46.8/MWh. The contract is now 1.9% above its level a month ago (£45.9/MWh).

Seasonal

Most seasonal baseload power prices moved downwards last week, falling on average by 1.5%. Summer 18 power declined 1.1% to £43.5/MWh and the winter 18 contract fell 1.0% to £49.3/MWh.

Annual April 18

The annual April 18 power contract went down 1.1% to £46.4/MWh. In comparison with the same period last month (£46.0/MWh), prices were 0.8% higher. Additionally, the value was 11.4% higher than the same time last year (£41.7/MWh).