UK Energy Pricing Trends - 26 Feb. 2021

UK Power Pricing Trends | 26 February 2021

Wind turbine power output fell to just 3GW on Friday, compared with more than 10GW a week earlier. As a result, day-ahead prices rose substantially into the weekend. However, gas market dynamics were able to guide short-end futures lower, even with very low wind levels expected throughout early March. Carbon, despite hovering around record highs, failed to lend meaningful support to prices, and all but one of the front four seasonal contractors declined, pressured by gas market fundamentals.

UK Natural Gas Pricing Trends | 26 February 2021

A notable decline in gas demand in the U.K saw spot and short-end prices drop last week. U.K. temperatures averaged 9.6°C between the 20th and 26th of February, an increase of more than 3°C on the previous week. Consequently, average daily local  distribution zone (LDZ) offtake fell by 25% week-on-week to 144 million cubic metres per day. Further pressuring forward contracts was a busy LNG tanker schedule for early March, with 11 tankers expected in the first week. The healthy supply outlook lead prices lower, despite LNG imports into northwest Europe actually falling week-on-week.

UK Energy Complex | 26 February 2021

Speculation is brewing regarding the likely price levels of U.K. carbon allowances (UKAs), following the release of additional information on the scheme in February. Bloomberg New Energy Finance (BNEF) suggested that, without a link to the EU scheme, U.K. emitters could face UKA prices in excess of £100/tonne before the end of the decade due to limited remaining capacity for coal-to-gas fuel switching. Coal prices exhibited strength last week with colder weather expected in some eastern states in early March, while exports were hindered in Russia and South Africa, two major global exporters. Although coal contributed just 130MW on average last week, higher coal prices may well have limited declines in the month-ahead U.K power contract last week with low winds expected to tighten grid margins and force coal plants into action.

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