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WEEKLY ENERGY MARKET REPORT: 18TH – 24TH FEBRUARY 2019

Ignite bring you the latest energy news across the UK and Europe. We have the expertise when it comes to translating energy industry consumption trends. Here’s the latest news from the UK, Europe and the rest of the world.

The European and the UK power markets experienced a bearish week amid increasing levels of supply and a milder weather outlook, that resulted in falling levels of demand. Similar is the picture in the natural gas market, with a downside moment on the prompt contracts within the week, however, the oil rally on Thursday added support to the curve contracts that closed the week higher. Import flows from the Continent to the UK were more or less stable during last week, with an exception in Wednesday where Vesterled flows were reduced by almost 5mcm.

Oil benchmark, Brent Crude, reached its highest level in this year and settled at $66.25/bbl on Friday amid OPEC-led supply cuts, US sanctions on Venezuela and Iran and optimism around the USA-China trade talks.

The YoY inflation rate in the UK fell to the level of 1.8% in January from last December’s 2.1% figure. That was the lowest inflation rate in two years for the UK and it is attributed to low gas, electricity and fuel costs.

The UK energy market last week

  • The bearish movement in the UK natural gas and power markets continued for another week amid increasing levels of supply and a milder weather outlook ahead.
  • The recent surge in oil prices, however, lent some support to the power and natural gas curve contracts.
  • UK YoY inflation for January dropped to 1.8% from 2.1% in the previous month due to a slowdown in energy costs.

UK natural gas prices

The natural gas market in the UK experienced a downwards movement in proport contracts amid healthy renewables generation that was stable and above 5GW during the week. However, the overall strengthening in the energy complex added support to the curve contracts thus pulling prices upwards.

Day-ahead closed at 46.90p/th and month-ahead at 47.70p/th, a decrease of 2.3% and 0.7% respectively, week on week.

In terms of curve contracts, Sum-19 settled at 46.30p/th on Friday, that is 1.1% higher week on week while Win-19 settled at 58.98p/th, that is 1.3% higher during the same period.

UK electricity prices

UK power prices opened low during last week however there was a significant price increase on Friday that resulted in prices closing almost flat week on week.

Day-ahead closed the week at £48.50/MWh and month-ahead at £50.25/MWh, that is 5% and 2.6% lower week on week for both contracts respectively.

However, Sum-19 contract slipped by 0.8% week on week and settled at £49.52/MWh on Friday while Win-19 closed the week flat at £58.83/MWh.

Macroeconomics

Oil has reached its highest level this year after moving upwards by more than $1.6/bbl on Friday from Thursday’s close. Currently, Brent crude oil is trading at $66.32/bbl. The factors that determined the surge in the oil market are the supply cuts by OPED, the hope of a positive outcome in the US-China trade dispute, and the US sanctions on Iran’s and Venezuela’s oil industry.

Energy trends to watch this week

  • UK wholesale gas prices opened higher on Monday morning following an unplanned outage that reduced Norwegian import flows. However, healthy renewables generation with a wind output around 9.5GW is expected to weigh on prices during the day.
  • The YoY German inflation rate for January will be announced on Thursday 21 February following the 1.7% from last December.

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