News / Weekly Energy Report - Oil price spike raises power curve

Weekly Energy Report - Oil price spike raises power curve

For your update on what’s happened in the energy market over the past week, get Haven Power’s market report. Here’s our summary for the past 7 days, starting on Monday 16th September:

  • UK power’s front four seasons increased 2.6% on Monday 16th after an oil price spike
  • Curve power prices fell on Wednesday 18th after a French nuclear announcement
  • The power day-ahead price fell due to dropping National Balancing Point (NBP) prompt prices
  • Average weekly wind generation was lower after poor mid-week output levels

Read more below:

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Prompt/Day-ahead Power

The day-ahead power price for Monday 16th September increased in reaction to a drop in wind generation and a higher NBP gas day-ahead price. Maintenance on the BritNed interconnector started Monday; this removed 1GW of capacity to the UK. It also contributed to the bullishness of prompt power prices at the start of week 38.

The following day, the day-ahead price fell despite a rising NBP. A fall in power demand on Tuesday 17th contributed to the lower day-ahead baseload price. Prices were also pressured by marginal increases in wind generation, and a 4GW daily increase in solar.

Prompt power prices for delivery on Wednesday 18th moved lower despite much weaker wind output. The fall in the day-ahead power price was in response to a dropping NBP prompt price. The drop in NBP prompt price was due to high supplies caused by a Liquefied natural gas (LNG) vessel arrival.

The day-ahead price for Thursday 19th dropped slightly despite wind output remaining low. The BritNed interconnector and falling NBP prompt prices were the main factors impacting the power prompt.

Prompt prices for Friday 20th fell even further due to an increase in wind generation and a fall in demand. Wind output increased over the day from below 2GW in the early hours of the morning to 10.8GW in the late evening.

2019-09-23 pricingreportgraphs1

Imbalance Prices

During week 38 the imbalance price broke above £80/MWh on three occasions. The highest price was £98.70/MWh during settlement periods 16 & 17 (07:30 – 08:30) on Wednesday 18th. The price was set by Killingholme B power station; a 900 MW capacity Combined Cycle Gas Turbine (CCGT) plant whose offers to increase generation were accepted by national grid.

The imbalance price was not negative at any point over the week. It did reach a low of £0/MWh on the Wednesday over settlement period 27 (13:00 – 13:30). This price was set by a single bid to reduce generation from West Burton B, a 1.33GW CCGT power station.

2019-09-23 pricingreportgraphs3

Renewables and other

Wind generation rose to highs of 6.85GW on Tuesday 17th. Following this, generation levels fell down to 1.65GW over Wednesday 18th and 1.25GW on Thursday 19th.

Solar generation began the week with a peak output of just 3.3GW on Monday 16th. Output increased throughout the rest of the week, until Saturday 21st, with peak generation remaining above 6.5GW. The highest output level in week 38 (7.6GW) occurred on Friday 20th. Peak output on Sunday 22nd dropped significantly, reaching just 2.75GW.

Wind output surged towards the end of the week with the daily average jumping to 4.55GW on Friday 20th. The highest level of generation in the week came during the early afternoon of the next day, hitting 11.6GW. Over the rest of the week wind output dropped back down and averaged 6.35GW on Sunday 22nd.

Average solar output was up from a 1.5GW to 1.75GW week on week; and wind was down from 6.5GW to 4.85GW over the same period.

2019-09-23 pricingreportgraphs4

Seasonal Contracts

Secure and promote* (Seasons +1, +2, +3, +4) baseload contracts fell by £0.67/MWh on average over week 38.

On Monday 16th September, curve power contracts realised gains due to several factors. The first was the continued risk of French nuclear outages limiting power imports to the UK. The full extent of outages were not yet confirmed, which is why it remained a significant price risk. The second factor was the oil price spike caused by drone attacks on Saudi Arabian oil infrastructure. These attacks removed 5% of global oil supply. Brent crude rose from $60.22/bbl at the close of the market on Friday to highs of $71.95/bbl during the trading day on Monday. This bullishness also fed into the wider energy complex. The European Union Allowances (EUA) carbon Dec-19 contract increased 2.5% day-on-day. There was also a 5.5% increase in the front season NBP future contract over the same period.

Prices for secure and promote contracts on Tuesday 17th fell, following losses on the wider energy complex. The downward correction of Brent crude prices drove these losses, following the spike on Monday. In consequence we saw NBP curve products, EUA carbon and Rotterdam coal all trading lower.

Curve power contracts decreased further on Wednesday 18th, after a French nuclear availability update. The announcement from EDF that there were no plans to close any of its French nuclear reactors lowered the risk of a spike in European power

Following the drone attack the Saudi oil minister predicted the Kingdom’s oil production would be restored to normal by the end of September. This news caused oil prices to continue to fall.

Thursday 19th delivered mixed movements in curve prices. Contracts rallied in the morning following bullishness in the energy complex. NBP products, oil and carbon prices all traded higher. In the afternoon, movement in the gas market turned bearish, reversing gains made in the morning. This bearish sentiment in gas also dragged down curve power prices. As a result, some of the near-term contracts made losses on the day.

On Friday 20th the power curve rallied following a bullish energy complex. There was a day-on-day 2.25% rise in Dec-19 EUA carbon and modest increases in NBP gas curve contracts.

2019-09-23 pricingreportgraphs2

*For more information about Secure and Promote, please consult this Ofgem web page.

Annual Power

The annual power graph shows how the value of an annual power contract changes over time. The annual contract value is the average of the front two seasons, currently winter 19 and summer 20.

2019-09-23 annual-prices

To help you make sense of the industry, you can also use our jargon buster and handy guide to Third Party Costs (currently 60% of your bill). And for interesting articles and useful insights, look out for our blog.

Report written by Thomas Stebbings and Ben Symonds and George Goodhew - Haven Power’s Portfolio Analysts. To speak to them, or the rest of our Flex & Portfolio Management team’s analysts, call 01473 707755 quoting reference HP250.

Disclaimer

Although we’ve made all reasonable effort to verify the information in this report and provide the highest possible accuracy, Haven Power Limited gives no warranty - express or implied - in respect of this information. Furthermore, our provision of this report does not constitute advice of any kind and readers should not take it as the basis for any commercial or financial decisions. You should make any such decision based on your own records, knowledge and perception of power market data, supplemented with appropriate independent expert advice when required.

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