UK Power Pricing Trends | 9 March 2021
Power demand in the U.K. was no higher last week than the week before, yet spot prices were up more than half week-on-week as renewable generation output fell substantially – wind turbines contributed just 500MW, or just 1.5% of the total daily power output on Tuesday. Despite forecasters expecting winds and temperatures to increase sharply into mid to late March, in addition to largely bearish medium run gas market fundamentals, forward power contracts closed the week significantly higher as sharp gains in oil guided sentiment into the weekend.
UK Natural Gas Pricing Trends | 9 March 2021
On average, wind contributed less than 2.5GW to the U.K. power mix last week, down nearly 75% week-on-week. As a result, natural gas contributed more than 70% more to the generation mix compared with the previous week. Despite strong LNG deliveries and a 20% increase in gas flows from Norway offsetting the higher demand, U.K. storage levels fell 9.5 percentage points week-on-week and spot prices climbed sharply into midweek. Conversely, forward contracts fell during the same period, with stronger winds and higher temperatures forecast into late-month, in addition to an increasingly busy LNG import schedule. All key fundamentals became secondary into the end of the week, however, amid an oil market rally. Brent crude climbed more than 8% in two days, closing the week at the highest price since May 2019 and supporting the forward gas curve.
UK Energy Complex | 9 March 2021
Despite its growing obsolescence as a generation feed stock in Europe, oil demonstrated last week its remarkable ability to dominate the energy market narrative and price action. European gas prices were beginning to exhibit the bearish trend commonly associated with the time of year, as the focus turns to warmer temperatures, more productive renewable infrastructure, and gas storage reinjection. Similarly, carbon EUAs had struggled for momentum following the record highs achieved in mid-February. However, in both cases, the rally in global crude benchmarks was able to energise rather idle markets, despite the tenuous fundamental relationship.
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