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Ignite energy market report 17/6/19

WEEKLY ENERGY MARKET REPORT: 17th JUNE 2019

Ignite bring you the latest energy news across the UK and Europe. We track and analyse changes in the energy market to keep you informed and up to date. Here’s the latest news from the UK, Europe and the rest of the world.

The British power market dropped during the second week of June. The downward movement was temporarily interrupted on Thursday, mainly as a side effect of the jump in oil prices that day. Wind generation started the week low but picked up quickly and generated more that 6GW from Wednesday onwards.

The picture was similar in the natural gas market. Norwegian flows remained steady during the week. The maintenance period did not affect the flows from Norway as we saw some rerouting inflows from Germany due to maintenance issues in one German terminal.

In the wider energy complex, we saw oil prices jump up on Thursday following the attack on two oil tankers in the Gulf of Oman. The markets reacted instantly, with Brent Crude rising by more than 3.00% within-day however, prices settled on Friday almost flat at $62.01/bbl.

The UK energy market last week

  • The British power market softened during last week by 2.30% on average across the prompt and curve contracts.
  • Demand levels remained relatively high throughout the week and most days exceeded the seasonal normal levels by more than 50mcm.
  • Oil prices jumped by more than 3.00% within-day, on Thursday after the attacks on two oil tankers in the Gulf of Oman, however, we saw prices softening the next day on the back of the strong US oil inventories and the ongoing trade war between the USA and China.

UK natural gas prices 

The British wholesale natural gas prices softened by 4.10% on average thus continuing the bearish movement of the last few weeks. Norwegian flows kept the system length comfortable during most days in the absence of strong LNG arrivals.

Day-ahead closed at 29.30p/th, that is 3.90% lower from last week whereas month-ahead settled 3.70% lower from last week at 28.70p/th.

In terms of curve contracts, Win-19 settled at 51.42p/th and Sum-20 at 44.13p/th, a decrease of 4.70% and 4.40% within-week for both contracts respectively.

UK electricity prices

Power prices decreased during last week as wind generation increased from Wednesday onwards while imports from the French interconnector remained at capacity levels throughout the entire week.

Day-ahead fell by 1.10%, at £38.80/MWh whereas month ahead decreased by 2.00%, at £39.32MWh.

Win-19 settled at £55.68/MWh and Sum-20 at £47.60/MWh, a drop of 2.90% and 3.00% within-week for both contracts respectively.

Macroeconomics

In terms of macroeconomic news, the Pound dropped even below the €1.12 levels at the beginning of the week and is expected to keep trading at similar levels as we move into the period of the race for the New Conservative Party Leader.

What to watch this week

Outlook: Following a relatively cooler-than-previously -anticipated week, this week we see both weather forecast models, EC and GFS, agree that average UK temperatures will rise above seasonal normal levels.

The race for the new PM is likely to affect the FX and carbon markets based on what type of Brexit is most likely to be supported by the final winner and their view on a post-Brexit relationship between the EU and the UK.

  • Wednesday June 19: GB’s actual inflation rate for May will be announced. Last month’s rate was at 2.10% while the consensus indicates that inflation will remain unchanged.
  • Thursday June 20: BoE will announce their decision on interest rates which currently hold at 0.75%. The market expectations are that interest rates will stay the same.

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