Gas & electricity - at a glance

Transcription

1 $/barrel /tco 2 e p/therm /MWh Gas & electricity - at a glance Week-on-Week Annual Gas Price Changes Short-term gas contracts jump Cold snap forecast for the first half of February, lifting demand Longer-dated contracts largely unaffected Brent and WTI drop from recent highs Rising US production the main driver in losses last week US suppliers increasing drilling to take advantage of recent price gains Week-on-Week Oil Price Changes (-0.02) (-0.27) (-0.50) Year Apr18 Year Oct 18 Year Apr 19 Oil & carbon - at a glance Short-term power prices follow the gas market higher Stronger demand and lower wind output lifts Day-ahead power prices Power prices virtually unchanged beyond the March contract Week-on-Week Annual Electricity Price Changes Carbon costs drop back from last week's five-year highs 2018 allowances down 8% from peak as losses continue today Market unclear of direction ahead of crucial policy vote this week Week-on-Week Carbon Price Changes (-0.05) (-0.07) (-0.17) Year Apr 18 Year Oct 18 Year Apr (-2.32) (-1.76) (-1.57) (-0.69) (-0.61) (-0.90) (-0.10) (-0.22) (-0.17) (-0.17) (-0.22) 8.90 Dated Brent Apr 18 May 18 EUA 2018 EUA 2019 EUA 2020 Page 1

2 $/tonne $/tonne $/tonne Exchange rate Coal & exchange rates - at a glance Coal prices down 5% across the curve China passes peak winter heating demand Government policy continues to drive move away from coal burn Week-on-Week Coal Price Changes Gasoline demand in West Africa remains strong US export demand weakened despite drop in stocks Oil product stocks at their highest level since September Week-on-Week Transport Fuel Price Changes Week-on-Week Exchange Rate Changes US stock market suffers worst week in two years UK factory growth drops to seven-month low Europe outpaces UK and US in GDP growth (-4.68) (-5.35) (-4.72) (-0.002) (+0.006) (-0.007) 1.05 (-4.72) (-4.54) (-0.002) (-0.007) (+0.006) $/ $/ / Oil products - at a glance Weakness in crude oil market provides downside to products prices Gasoil stocks jumped 5% last week Strong imports and weak local demand weigh on prices Week-on-Week Heating Fuel Price Changes (-1.00) (-21.50) (-1.00) (-13.50) (-18.75) (-18.75) (-12.00) (-8.34) 0.00 ULSD ULSP Kerosene Gasoil HFO MFO Page 2

3 /MWh p/therm Gas - summary A short-term cold snap for the first half of February lifted Day-ahead and front-month gas prices last week. Prompt prices climbed 7% while the March contract was up 4% on expectations of higher demand. Below seasonal-normal temperatures have increased heating consumption today, but the UK gas system has coped. The colder weather is forecast to continue for at least the next two weeks. Heavy withdrawals from medium-range storage have been required to balance the system as total gas demand is over 370mcm. After a milder than expected January the UK is in a strong position to cope with the higher demand, particularly compared to the supply problems seen in December. An unseasonably mild start to 2018 allowed storage reserves to be built up to record levels for this time of year. Interconnector imports climbed to near maximum levels at 60mcm and imports from Norway and the Netherlands via BBL have also remained strong. While it is unclear whether the cold snap will linger into the second half of February, longer-dated gas contracts were largely unaffected by the short-term drop in temperatures. Annual contracts remain around four-month lows having fallen sharply through January. 90-day Snapshot Gas Prices Week-on-Week Contract Changes 52 NBP 02-Feb-18 Change (p/th) Change (%) Year Apr18 Year Oct 18 Year Apr 19 Year Oct 19 Electricity - summary Day-ahead Month Mar 18 Month Apr 18 Month May 18 Quarter 3 18 Year Apr18 Year Oct 18 Year Apr 19 Year Oct Forward power prices were closely correlated to movement in the gas market last week. Expectations of higher demand as temperatures dropped below seasonal-normal provided support to the Day-ahead and front-month contracts. However, the power curve was largely unaffected with prices holding at previous lows after easing through most of January. Below seasonal-normal temperatures have pushed peak demand to around 49GW, while wind output has fallen below 2GW. This supported a recovery in Day-ahead power prices to 51/MWh, having fallen to lows of 46/MWh during the mild, windy conditions of January. The short-term cold snap has had little impact on the power curve, with longer-dated electricity contracts unchanged or marginally lower across the week. Coal and carbon costs had slowed the decline in electricity, compared to the gas market, but both commodities have since fallen from their January highs, which could add further downside to the electricity curve. 90-day Snapshot Electricity Prices Week-on-Week Contract Changes 50 NBP 02-Feb-18 Change ( /MWh) Change (%) 48 Day-ahead Month Mar Month Apr Month May 18 Quarter 2 18 Year Apr 18 Year Oct Year Apr 18 Year Oct 18 Year Apr 19 Year Apr 19 Year Oct #N/A #N/A #N/A Page 3

4 /CO2e $/barrel Oil - summary Crude oil prices eased in the last week, falling back from the three-year highs reached in January. Losses were heaviest on the US-based WTI market, with prices down 4% in response to higher production in the United States. OPEC production cuts, a weakening US dollar and signs of strong global oil demand have supported oil prices in the last few months. Brent crude rallied around 13% since the start of December. However, gains in the market were persistently capped by expectations of higher US production. Oil production in the United States has been climbing since August last year but as the market price reached three-year highs of over $70/bbl, suppliers were encouraged to increasing drilling activity. US production is expected to shortly reach 10 million barrels per day, on a par with OPEC s largest supplier, Saudi Arabia. The higher supply has threatened to derail efforts from OPEC to reduce global oversupply. As a result, prices softened from their earlier highs, with Brent crude dropping to $68/bbl, and heavier losses seen in the WTI market day Snapshot Brent Prices 50 Dated Brent Apr 18 May 18 Jun 18 Carbon - summary Ave Brent Dated Brent Apr 18 Ave WTI Apr 18 May 18 Exchange rate $/ $/ / Week-on-Week Contract Changes 02-Feb-18 Change ($/bl) Change (%) Carbon prices fell in the last week, dropping back from the previous weeks highs, not seen for more than five years. After the price of allowances for 2018 spiked to 9.50/tCO2e, prices have struggled for clear direction and further losses this morning have pulled prices below the 9 mark. Speculation over proposed EU ETS policy reforms had prompted the drive higher seen throughout January. However, the market has struggled for clear direction since and with a vote scheduled in the EU Parliament this week the realisation of the plans near. Allowances for 2018 have dropped below 8.70 this morning, down over 8% from the previous highs. It remains to be seen how the market will react to this week s vote day Snapshot Carbon Prices EUA 2018 EUA 2019 EUA 2020 EUAs EUA 2018 EUA 2019 EUA 2020 CERs CER 2018 Week-on-Week Contract Changes 02-Feb-18 Change ( /tco2e) Change (%) Page 4

5 $/tonne % Change $/tonne Coal - summary Coal prices dropped 5% across the curve in the last week, dropping sharply from multi-year highs reached at the turn of the year. The downward move comes as Chinese demand shows signs of easing with the peak winter heating season coming to an end. Freezing temperatures in China had driven demand for coal in the world s largest consumer of the fuel. Prices rallied throughout 2017 and extended multi-year highs in January. Chinese coal firms announced price cuts in an attempt to stop the upward rally and the move appears to have helped, with annual prices around 10% below their previous peak. Government policy in China continues to drive switching from coal to gas-fired generation in an effort to reduce carbon pollution. The long-term outlook for the coal market remains weak with global energy policy continuing to drive a move away from coal burn. The 2020 annual contract holds a $10 discount over the front-month market day Snapshot Coal Prices Oil products - summary Week-on-Week Contract Changes Month Mar 18 Month Apr 18 Month May 18 Month Jun 18 Quarter 2 18 Quarter Feb Weakness in the underlying crude oil market has weighed on product prices, with heavy losses seen in diesel, gasoil and fuel oil contracts in the last week. Gasoline prices were little changed, with the market still supported by strong demand in West Africa. Gasoline refining margins in Europe rose 19% in the last week on the back of higher consumption and a series of planned maintenance at refineries in Germany, Asia and the Middle East. Oil product stocks in Europe have risen to their highest level since September, while US demand has also weakened, despite an unexpected drop in US gasoline stocks. Diesel and gasoil prices fell around $20/tonne last week as large gains in gasoil stocks weighed heavily on prices. ARA gasoil stocks which include diesel and heating oil climbed 5% last week amid weak local demand and strong imports from other regions. Russian flows from the Baltic Sea are forecast to rise over 4% in February. Despite the losses in the last week, contracts across the products markets remain close to multi-year highs having climbed strongly throughout Change ($/t) Change (%) day Snapshot Oil Product Prices Sep 27-Oct 27-Nov 27-Dec 27-Jan ULSP ULSD Gasoil Fuel Oil EIA Inventory data Week-on-Week Change Gasoline Stocks Gasoline Demand Distillate Stocks Distillate Demand Product Imports Refinery Usage Page 5

6 % change mcm GWh Fundamentals This is a brief summary of the important fundamental developments in the energy markets over the last week. For more detailed and daily information please subscribe to our Fundamentals Review. 20,000 UK Medium-Range Storage Data 15,000 10,000 5,000 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Medium-range storage reserves are at record levels for this time of year, boosted by strong gas imports from Europe to the UK UK Local Distribution Zone Demand 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Domestic gas demand remained low for the time of year last week as temperatures remained at above seasonalnormal levels. However, a cold snap this week has lifted demand. Week-on-Week Change on UK Generation Mix 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% -25.0% 18.4% 4.2% 0.1% -20.9% -0.3% 0.0% -1.5% Gas Coal Nuclear Wind France Netherlands Other Wind levels fell sharply late last week as temperatures dropped. This increased the use of gas in the generation mix. Page 6

7 Thousand tonnes % Change GW Fundamentals This is a brief summary of the important fundamental developments in the energy markets over the last week. For more detailed and daily information please subscribe to our Fundamentals Review Day National Grid Demand Forecasts Feb 05-Feb 06-Feb 07-Feb 08-Feb 09-Feb 10-Feb 11-Feb 12-Feb Low wind output and colder temperatures expected this week have lifted forecast power demand to a peak of around 49GW. Energy Information Administration Inventory Data /01/ /02/ Week-on-Week Change Crude Oil Stocks (EIA) Crude Oil Imports Crude Oil Demand Crude oil imports rose in the last week despite demand falling 2%. Stock levels saw little change overall UK Coal Stocks and Consumption Oct 16 Nov 16 Dec 16 Jan 17 Feb 17 Mar 17 Apr 17 May 17 Jun 17 Jul 17 Aug 17 Sep 17 Oct 17 Electricity Generators Total Stocks Total Consumption Coal consumption through the summer season has been minimal, with several days of zero coal-fired generation. Total stocks have eroded in the last year but the market remains heavily oversupplied. Page 7

8 Product Prices Historical ULSP Wholesale Prices Historical ULSD Wholesale Prices ULSP 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average ULSD 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average $/tonne $/tonne p/litre p/litre Jan 23-Jan 24-Jan 25-Jan 26-Jan Average 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan Average $/tonne $/tonne p/litre p/litre Jan 30-Jan 31-Jan 01-Feb 02-Feb Average 29-Jan 30-Jan 31-Jan 01-Feb 02-Feb Average $/tonne $/tonne p/litre p/litre Gasoline prices held firm, underpinned by strong export demand to West Africa. Historical Gasoil Wholesale Prices Historical Heavy Fuel Oil Wholesale Prices 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average $/tonne $/tonne p/litre p/litre Jan 23-Jan 24-Jan 25-Jan 26-Jan Average 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan Average $/tonne $/tonne p/litre p/litre Jan 30-Jan 31-Jan 01-Feb 02-Feb Average 29-Jan 30-Jan 31-Jan 01-Feb 02-Feb Average $/tonne $/tonne p/litre p/litre Diesel and gasoil prices moved lower by reports of very high stock levels in Europe. Historical Kerosene Wholesale Prices Historical Medium Fuel Oil Wholesale Prices 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average 15-Jan 16-Jan 17-Jan 18-Jan 19-Jan Average $/tonne $/tonne p/litre p/litre Jan 23-Jan 24-Jan 25-Jan 26-Jan Average 22-Jan 23-Jan 24-Jan 25-Jan 26-Jan Average $/tonne $/tonne p/litre p/litre Jan 30-Jan 31-Jan 01-Feb 02-Feb Average 29-Jan 30-Jan 31-Jan 01-Feb 02-Feb Average $/tonne $/tonne p/litre p/litre The underlying crude oil market weakened, providing a downward signal to the wider products market. Page 8