Energy Market Update - Monday 14th December 2020
Gas and power prices have opened firmer this morning, mainly on the back of strengthening underlying commodities but dampened slightly by bearish mild temperatures and comfortable gas supply.
The latest temperature forecast for Europe and the UK suggest a mild picture for the next week which should ease some of the system tightness we have seen so far in December. Temperatures have however been revised colder for both the UK and NW Europe for the Christmas period with the 26th and 27th expected to be well below seasonal normal level.
These mild conditions have lengthened the UK line pack to 16mcm suggesting a comfortable supply picture for the day. We are expecting 6 LNG tankers this week with each site receiving at least 1 tanker. Sendout if currently 60mcm down on 7 day average of 80mcm but we would expect flows to remain steady through the week on the back of these arrivals.
Power fundamentals are comfortable this morning with strong wind at 11GW and nuclear at 6.5GW. this has reduced CCGT to 12GW with a small 0.6GW contribution from coal. Given this relative comfort, flows through the interconnectors to the UK are currently minimal. Flows from France are muted on the back of EDF nuclear strikes that lasted longer than expected, increasing demand for gas for power.
Carbon prices continue their upwards momentum from last week, currently trading at €31.09/tCO2e, the highest price recorded for the December 20 contract. This came on the back of last week’s decision by EU leaders to increase emissions reductions targets. Coal prices are also on the up trading at $64.85/ton, similar to levels seen in January as economic recovery begins in heavy coal using countries such as China. Brent prices are also strong this morning at $50.74/bbl with Covid vaccines being approved and rolled out among many countries, increasing optimism of global recovery into the new year.
The pound has seen some strength this morning on the back of news that Brexit discussions will continue past the latest deadline, currently trading at €1.10. Headlines coming from these discussions are likely to dominate currency movements in the next few days with few data sets to be released until PMI data is dropped on Wednesday.