UK Energy Pricing Trends - 26 Mar. 2021

UK Power Pricing Trends | 26 March 2021

With wind turbines meeting over half of the U.K.’s power demand at points on Thursday and Friday, a significant softening in spot power prices materialised throughout last week. This provided little respite to curve prices, however, as power contracts followed their corresponding gas contracts higher. Lower temperature forecasts for early April, as well as supply chain disruption, underpinned the gains in key energy markets, and saw short-end U.K. gas and power prices rally into the weekend. Longer-dated seasonal contracts were able to hold off significant gains as carbon EUAs moved lower on the week amid a frantic bid to contain the spread of the coronavirus in Europe.

UK Natural Gas Pricing Trends | 26 March 2021

A combination of supply and demand-side factors pushed U.K. gas contracts higher last week; particularly at the short end of the curve. Average daily gas flows into the U.K. from Norway fell by 7.5% week-on-week amid unplanned outages at key facilities, while the blockage at the Suez Canal in Egypt saw terminal-to-grid sendout fall by 9% under the assumption of delays to inbound LNG cargoes. Physical demand fell 8% week-on-week as the power output from the U.K.’s fleet of wind turbines increased nearly 40% to 8GW, nevertheless, cooler weather expected in early April boosted demand for short-end gas contracts following the weather-related increase in forecast gas demand.

UK Energy Complex | 26 March 2021

The blocking of the Suez Canal in Egypt, through which 2 million barrels of oil a day would usually be transported, dominated headlines last week and underpinned a volatile week in the oil market. However, the blockage failed to drive notable gains in benchmark crude futures. Instead, a strong dollar, as well as wider risk-off sentiment, pushed Brent crude to the lowest level since early February, before dip-buying and Suez-related concerns saw losses pared. Carbon prices reflected European economic sentiment last week,which drove the Dec-21 benchmark EUA below €40/tonne for the first time since March 9th. Both oil and carbon were given a boost on Friday, however, as global stocks rallied following U.S. President Joe Biden’s decision to double the U.S.’s existing vaccination target.

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