UK Energy Pricing Trends - 19 Mar. 2021

UK Power Pricing Trends | 19 March 2021

With gas, oil and carbon prices moving lower, there was nowhere else for U.K. power contracts to go but down last week. Seasonal contracts did receive a degree of support midweek when the price of the benchmark Dec-21 EUA reached a new record. However, the general tone was bearish amid warmer temperature forecasts and a sharp, downward correction in benchmark oil futures. After trading at the record price, carbon EUAs trended to the downside into the weekend as speculators were no longer able to fend off the fundamental drivers – chief among them: a fresh wave of virus restrictions across major, European economies.

UK Natural Gas Pricing Trends | 19 March 2021

Daily gas flows from Norway into the U.K. fell by 25% on average last week compared with the week before. Moreover, a drop in average wind output saw average daily CCGT generation output climb more than 20% to 10GW. Nevertheless, total gas demand was down week-on-week with average temperatures climbing by 25%, reducing local offtake by 12% week-on-week. The U.K. gas system was consequently 50 million cubic meters per day long last week on average, weighing on the spot market despite restricted Norwegian flows. A busy LNG schedule, alongside milder temperature forecasts and a bearish oil market pressured futures contracts lower. Additional price pressure was provided by carbon, which trended lower into the weekend amid a the European virus resurgence.

UK Energy Complex | 19 March 2021

European coal futures extended the year’s gains last week, climbing to the highest level since early January, where a combination of low gas supplies and weak renewable generation precipitated a mass firing-up of coal generation infrastructure to bridge the demand gap. The floods in Australia limited exports from key terminals, while mining was also affected. Rising prices in China also contributed to the narrative. Carbon EUAs twice recorded a record price last week as speculators and industrial compliers snapped up available allowances. However, a weaker energy market complex, in addition to a surge in COVID-19 in Europe, saw EUAs trend lower into the weekend, feeding into the wider gas and power market.

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