Prices actually increased on Friday and over the weekend due to Norwegian outages outweighing good news on wind and the Australian LNG strike being resolved. We see this as a short term situation with prices dropping back as Norwegian production comes back on line following late summer maintenance.
On the energy generation table below Renewables were up at 48% – led by wind at 42% – in the week before last but that was not totally reflected in wholesale electricity prices in our opinion. With a sustained period of high renewables output we should see electricity prices drop further.
Our long term view remains that electricity will continue to drop while gas will stabilise until we find alternatives to US LNG imports produced by fracking. Accordingly 1, or max 2, year contracts are recommended along with a move away from renewals in the October – April window when prices are more volatile if at all possible.
Gas: The gas market continued to strengthen at the conclusion of last week. Prices rose due to the continued ban on Russian fuel exports and extended outages at Norwegian gas facilities. Price gains were limited in the prompt due to the expectation of increased wind generation, reducing fuel-fired demand.
Power: Power prices tracked the Gas market last Friday. Prompt gains were limited as Wind generation is expected to output 11.7GWs/day this week, 20% above seasonal average. Gains in the UKA’s provided bullish momentum for further out contracts.
Crude: Oil prices finished last week volatile. Demand concerns arose following the release Eurozone’s economic data. The US Federal reserve is expected to decide on interest rates on the 28th of September, keeping investors anxious to enter the market.
Carbon (EU ETS): The ICE Dec-23 closed at €85.48/t last Friday, gaining from the previous close of €84.14/t.
Carbon (UKAs): The ICE Dec-23 closed at £36.62/t last Friday, a sharp increase from its previous close of £34.23/t.