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22/05/2023 - Weekly Wholesale Energy Market Report

Your Weekly Wholesale Energy Market Update - 22/05/2023


See below for the latest weekly wholesale energy market report and movements that have happened in the last week.


snapshot of energy movements

Oil and Markets - Weekly Energy Report


Last Week - Brent crude finished with a loss of 1.08%, or $0.81, to $74.17 per barrel, as the market tried to balance supply fears after the OPEC+ production cuts and renewed recession fears in the US and economic concerns in China. The debt ceiling talk in the US was postponed, and traders' fears grew due to another regional bank, PacWest Bancorp, teetering on the brink of crisis. The S&P 500 registered a dip of 0.16% to close at $4124, reflecting the bearish state of the financial markets.

This Week - Brent crude futures experienced a decline of 0.8%, settling at $75.58 per barrel, due to the failure of US politicians to agree on a new debt ceiling. This move raised concerns about the possibility of default and its impact on the economy, leading to reduced fuel demand. Additionally, the Fed Chair's comments about higher than expected inflation levels sparked concerns over potential interest rate hikes. Financial markets witnessed a 0.14% loss in the S&P 500, which closed at $4191. These developments caused worries among investors over the economy's health and its ability to sustain the index above $4200.

In summary, the oil markets have seen only a slight difference between last week and this week, with Brent crude ending both weeks with losses. However, the reasons for the losses were not identical. While last week's losses were driven by supply fears, this week's losses were caused by concerns over the failure to agree on a new debt ceiling and the possibility of default, leading to a reduction in fuel demand.


Gas and Power - Weekly Energy Report


Last Week - All relevant UK gas and power contracts saw large declines, with the front-month gas and power contracts losing 6.0% and 4.2% respectively. The market remained bearish due to strong LNG arrivals and growing storage levels, creating a bearish-to-sideways narrative in the near-term. European markets shared similar sentiments, with benchmark Dutch front-month gas dropping 6.36% to 32.8 €/MWh, while the German power contract felt a more reserved 0.3% drop to 92.2 €/MWh.


This Week - The UK gas market witnessed a partial recovery from the losses of the previous week but continues to trade near two-year lows. The front-month contract settled at 68.46 p/therm, experiencing a slight increase of 0.9% on Friday due to a technical correction. However, the overall trend remained predominantly bearish. The W23 and S24 contracts recorded slight gains of 1.5% and 1.3% respectively, driven by bullish comments from German gas operators regarding the upcoming winter. On the other hand, the UK power market experienced a longer-term bearish trend, with the day-ahead and front-month contracts declining by 8.4% and 0.8%, respectively. This was driven by favourable weather and strong renewables inputs. Nonetheless, the W23 and S24 contracts managed to record minor gains.


In summary, the UK gas market continues its bearish momentum while experiencing a slight improvement from the previous week. Meanwhile, the UK power market followed a longer-term bearish trend, experiencing a slight dip in the front-month contract, primarily driven by favourable weather and strong renewables inputs. Nonetheless, the upcoming winter sentiment from German gas operators reinstated some risk, leading to slight gains in the wider-reaching contracts.


 

Jargon Buster

  • Bearish - In relation to energy markets, bearish means that there is an expectation of a decrease in the demand for energy products, or an increase in the supply of energy products, which would result in a decrease in the price of energy products. This could be due to a variety of factors such as a slower economic growth, overproduction of oil and gas, or the emergence of alternative sources of energy. A bearish outlook for energy markets suggests that companies operating in the industry may struggle to maintain profits and may be forced to cut costs or reduce production.


  • Bullish - In relation to energy markets, bullish means that there is an expectation of an increase in demand for energy products, or a decrease in the supply of energy products, which would result in an increase in the price of energy products. This could be due to various reasons such as a growing global economy, production cuts by major oil-producing countries, geopolitical tensions that impact the supply, or a shift towards renewable energy sources. A bullish outlook for energy markets suggests that companies operating in the industry may see increased profits and may be able to invest in new projects to meet the growing demand for energy products.


weekly gas movements

How the market has opened each day:

DAY AHEAD PRICES

Gas (pence per therm)

Electric (£ per MWh)

15/05/2023

73.90

86.00

16/05/2023

74.00

87.00

17/05/2023

73.75

83.75

18/05/2023

66.00

80.50

19/05/2023

69.98

74.50

22/05/2023

​63.48

74.00


7 day averages


Gas (pence per therm) 70.19

Electric (£ per MWh) 80.96



weekly wholesale graph movements

 


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