WEEKLY ENERGY MARKET REVIEW

Transcription

1 WEEKLY ENERGY MARKET REVIEW WEEK 50, 2018

2 Last Week at a glance! BRENT M+1 GAS TTF Y+1 POWER GE Y $/bbl /MWh /MWh At the end of the last week the price rose, influenced by the announcement of a new agreement between OPEC and Russia to limit their oil production from At the beginning of this week, the price fell back amid worries over global stock markets and doubts that planned cuts will not be enough to reverse the current bearish trend. The price declined, stimulated by the fall of the spot prices and a good level of supply. The price declined, driven by the bearish movement of the spot contracts and the mild weather. Outlook (Horizon 1 Week) : Outlook (Horizon 1 Week): Outlook (Horizon 1 Week): A rise towards the resistance level of $/bbl. A rise towards the resistance level of /MWh. A rise towards the resistance level of /MWh, followed by a bearish correction. 2

3 HIGHLIGHTS Evolution of main energy products in the last week % : Average of prices of working days of Week -1 vs. Week -2 UK Power BL Y+1 0.3% Poland Power BL Y+1-2.8% Spain Power BL Y+1-0.2% Italy Power BL Y+1-0.2% Netherlands Power BL Y+1 0.2% Germany Power BL Y+1 0.0% France Power BL Y+1 1.2% Netherlands Gas TTF Y+1-1.3% France Gas PEG Nord Y+1-0.8% Germany Gas NCG Y+1-1.3% UK Gas NBP Y+1-0.5% Poland Gas Y+1-0.7% Italy Gas PSV Y+1-1.2% Coal API-2 Y+1 1.2% CO2 Dec % Gasoil M+1 0.4% Brent M+1 2.2% -7% 3% 13% 23% 3

4 OVERVIEW The European currency rose last week, influenced by a lower than expected value of the U.S. Nonfarm Payrolls for November and higher than predicted values of German and European Services PMI. At the beginning of this week, the USD rose back after the fail of the Brexit deal vote in the UK. This week, the main economic events in the European Union are the announcements of the ECB Interest and Deposit Rate Decisions along with the ECB Monetary policy statement and press conference Exchange Rates: /$ US EUROSTOXX

5 OVERVIEW The purchasing managers index is a composite indicator of a country's manufacturing activity. It takes into account order intake, production, employment, shipments and stocks in the manufacturing sector. PMI < 50: contraction in the activity PMI > 50: expansion in the activity PMI: US China Germany PMI - Germany PMI - China PMI - US 5

6 OIL The oil price rose, influenced by the announce that OPEC and its partners led by Russia, reached a new agreement to cut their oil production, beginning in January At the beginning of this week, the price fell back amid worries over global stock markets and doubts that planned cuts will be enough to rein in oversupply. OPEC and a coalition of producers led by Russia reached a deal late Friday to cut crude output by a collective 1.2 Mbl/d, in an effort to mop up a rising supply glut that had contributed to a % crude selloff over the past 2 months. OPEC nations led largely by Saudi Arabia agreed to cut barrels, while the Russia-led group is set to handle the remainder of the cuts. Venezuela, Iran and Libya were exempted from the cuts as a result of geopolitical and economic pressures that already limit those OPEC nation s production capabilities. China s imports of crude oil hit a fresh monthly high in November, customs data showed, beating the record set in October on heavy buying from private refiners and trial starts of new mega-refineries. Crude oil arrivals last month rose 8.5 % compared with the same month a year ago to Mbl/d, marking the first time China imported more than 10 Mbl/d. October s imports were 9.61 Mbl/d. For the first 11 months, China imported million tonnes of foreign crude oil, or 9.17 Mbl/d, putting it on track to make this year a record high for imports. As already mentioned, this rise was led by the private refiners, known as teapots, who bought 8.57 million tonnes of crude in November, or 1.94 Mbl/d, according to Refinitiv Oil Research and Forecast. Brent Oil M+1 - $/bbl Gasoil M+1 - /ton

7 OIL The United States last week exported more crude and refined products than it imported for the first time on record, with the crude exports increasing bl/d to 3.2 Mbl/d. This rise triggered a decline of the commercial oil stocks which fell 7.32 Mbl to Mbl during the weekended November, bringing inventories to 5.98% above the 5- year average. The decline far exceeded analyst expectations of a 2.39 Mbl draw in an S&P Global Platts analysis. Europe-bound exports increased 2.42 Mbl to 4.5 Mbl last week, S&P Global Platts Analytics Flow data showed. The uptick came amid a wide ICE Brent/WTI spread of around minus 8.48 $/b OPEC Crude Oil Production Mbbl/day Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 US: Crude Oil Stocks Mbbl (source: EIA) 7

8 COAL The European coal price continued their rise, drawing support from German stockpile replenishment as river levels is rising and bullish technical signals. However, the analysts expect this rise to stop this week as the prospect of milder weather across Europe and relatively strong renewable generation output will weigh on the prices. Chinese coal and lignite imports fell to 16-month low of t/day (19.8 Mt) in November, amid government restrictions on fuel shipments, customs data showed. The November volumes are 14 % lower than in the previous month and 13 % below the imports in the same month of Nevertheless, China s imports for the first 11 months of 2018 reached Mt, up 9 % from 2018, as the shortfall in domestic coal production stimulated the demand for imported material. COAL API2 (In USD/ton) Y+1 Y+2 Y+3 8

9 CO2 The CO2 prices slightly fell last week, influenced by the announcement that Poland will sell an additional 55.8 M of EUAs from its special reserve next year, increasing in this way the market supply. After this announcement, Refinitiv have cut its forecasts for EUA prices in 2019 and 2020 by 1 EUR/t, the analysts expect now the prices to average 22 EUR/t in 2019 and 24 EUR/t in At the beginning of this week, the CO2 price rose back in line with stronger power prices and improved coalgeneration profit margins. EU carbon emissions are expected to decline 0.7 % in 2018 due to a slight decline in coal and gas use, the Norwegian climate research insititute Cicero said in a report. However, global CO2 emissions are on track to rise 2 % this year on the back of a renewed growth of the coal generation, as well as continued growth in oil and gas consumption. Researchers expect the Chinese emissions to rise by 4.7 %, being not yet at their peak. The coal is likely to dominate the Chinese energy mix in the next decade, even if the strong growth seen in the mid-2000s in unlikely to return. EU CARBON (In EUR/ton) EUA Dec 18 CER Dec 18 9

10 NATURAL GAS Natural Gas Storage Total EU 28 : Date: % 97% 89% 53% 82% 81% 83% 72% 85% 64% 73% Ukraine: 50% 10

11 NATURAL GAS LNG Storage Total EU 28 : Date: % 78% 39% 45% 83% 69% 71% 65% 11

12 NATURAL GAS Oil linked natural gas premium at 5.14 EUR/MWh Oil linked natural gas price (EUR/MWh) Oil linked gas price Cal Y+1 Dec Dec Evolution 0.00% Forecast TTF gas Cal Y+1 Oil linked gas price Cal Y+1 Premium [Oil linked gas] - [ZEE TTF average] 12

13 19/02/ /03/ /03/ /04/ /04/2018 /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/ /10/ /10/ /10/ /11/ /11/ /12/2018 NATURAL GAS The price strongly declined amid forecasts for mild weather and a healthy supply. According to the traders, the European markets are attractive nor for LNG and this situation will continue for a while, due to the decline of the Asian prices over the past few weeks. TTF SPOT EUR/MWh EUR/MWh on 01/03/2018 Market Average Period Price /MWh Month M-12 December Month M-1 November Month M December Current Year Year Y

14 NATURAL GAS The TTF futures declined, influenced by the fall of the spot prices and the bearish movement of the electricity contracts. Norway's energy ministry has approved the plan for development of the third phase of the giant Troll field in the North Sea, as operator Equinor looks to maintain stable Norwegian gas production well into the 20s. The Norwegian company and its partners plan to start gas production from Troll phase 3 in the first half of Troll phase 3 has been touted as the main project offshore Norway to keep gas production levels -- currently at around 120 Bcm/year -- stable over the next two decades. The timing of the development plan for phase 3 and its projected start date come at a critical time for European gas given the stark warnings of falling UK and Dutch gas output at the start of the 2020s. The Troll partners are Equinor (.58%), Norwegian state holding company Petoro (56%), Shell (8.1%), France's Total (3.69%) and US major ConocoPhillips (1.62%) TTF Forward Prices EUR/MWh Y+1 Y+2 Y+3 Spread /MWh 12-Month moving average Last Week average TTF Y+2 vs Y TTF Y+3 vs Y

15 1/8/2018 1/24/2018 2/9/2018 2/25/2018 3/13/2018 3/29/2018 4/14/2018 4//2018 5/16/2018 6/1/2018 6/17/2018 7/3/2018 7/19/2018 8/4/2018 8/20/2018 9/5/2018 9/21/ /7/ /23/ /8/ /24/ /10/2018 NATURAL GAS Germany will not withdraw its political support for the Nord Stream 2 gas pipeline with Russia, its foreign minister said last week, as some lawmakers suggested curtailing the project to punish Moscow for its seizure of Ukrainian ships and their crew in the Azov sea. Later, an U.S. diplomat said that through this pipeline Russia seeks to increase its leverage on the West while severing Ukraine from Europe. Nord Stream 2 has been opposed both by President Donald Trump, a Republican, and his Democratic predecessor Barack Obama as a political tool for Russia to consolidate power over Europe. Main European Hubs Gas Prices EUR/MWh TTF Y+1 NCG Gas Y+1 IT PSV Gas Cal Y+1 PEG Nord Y+1 Spread vs TTF 12-Month moving average Last Week average PSV (IT) TRF (FR) NCG (GE) Greek Prime Minister Alexis Tsipras, after talks with Russian President Vladimir Putin, announced that Russian natural gas can be pumped through the TRANS- Adriatic pipeline (TAP), which is designed to transport Azerbaijani gas to Europe, as the technical conditions do allow for it. Such a project increases the significance of Greece as the regional energy hub, Tsipras said on his part, complaining, however, over double standards the EU bureaucrats have been showing over the Turkish Stream and other projects involving Russia. NBP Gas Futures GBP/therm Sum19 Win 19 15

16 NATURAL GAS Asian spot LNG prices continued their decline, as the demand for spot cargoes remains subdued, due to the mild weather. The traders frantically sold uncommitted cargoes stored off the coast of Singapore, Malaysia and South China as the market shifted into backwardation. The decline is supposed to continue this week as strong spot availability is expected to weigh on offers, with cargoes soon expected from 4 new projects in the U.S., Australia and Russia. Henry Hub (USA), TTF (EU), JKM (Japan) SPOT USD/MMbtu According to the United States Energy Information Administration (EIA), the US LNG export capacity is slated to reach 251 mcm/d or 91.7 bcm/year by the end of 2019, making it the third largest in the world after Australia and Qatar. The current US export capacity (as of early December 2018) stands at 101 mcm/d or 37.2 bcm/year and will near 50.6 bcm/year at the end of the year, when 2 LNG trains will start operations. Consequently, US exports are predicted to ramp up along with the growing export capacity, from 24.9 mcm/d (9 bcm/year) in 2017 to 82 mcm/d or 29.9 bcm/year in 2018 and 147 mcm/d or 53.6 bcm/year in Exports of LNG from Australia's east coast in November were the second highest since shipments began at the beginning of 2015 as volumes to China set an all-time record, data from the Gladstone Ports Corporation showed Thursday. A total of 1.92 million mt of the fuel was shipped during the month from the Port of Gladstone - which is home to all 3 of eastern Australia's LNG export terminals --showing an increase of 13% year on year from 1.70 million mt and 10% above 1.76 million mt in October. The port set its highest monthly total in December 2017 with 1.99 million mt, the data showed. The July-September China's total LNG imports reached a record of 13.2 million mt - of which Australia supplied about 47% Asian LNG Spot Natural Gas Henry Hub Natural gas TTF 16

17 ELECTRICITY The German spot price strongly declined last week, pushed by expectations of mild and windy weather. At the beginning of this week, the prices rose back amid forecasts of a plunge in wind power output and strong demand, boosted bycold weather. The European Commission has adopted a decision imposing the transmission system operator TenneT to increase the electricity trading capacity between Western Denmark and Germany and to ensure a specific guaranteed capacity available at all times. This announcement ends the formal investigation opened in March 2018 to check whether TenneT infringed EU antitrust rules by systematically limiting southward capacity at the power interconnection between the two countries. The maximum export capacity from western Denmark to Germany is MW but, on several occasions, TenneT has made les than 10 % available to market participants due to bottlenecks in the German grid. German Power Day Ahead Baseload EUR/MWh MARKET AVERAGE PERIOD PRICE /MWh Month M-12 December Month M-1 November Month M December Current Year Year Y

18 ELECTRICITY The German contracts slightly declined, being influenced by the bearish dynamics of the spot prices. This influence was largely compensated by the bullish movement of the carbon and coal contracts, which made the prices to rise at the beginning of this week. Germany s green energy fund grew by 213 millions of euros in November, to a total value of 3.9 billions of euros, TSO data showed. This is the second consecutive rise after the fund s surplus had fallen for 5 months in a row. Last month, the fund generated income of 2.1 billions of euros, with expenses at around 1.9 billions, according to the 4 German TSO. The fund s surplus generally grows in the winter months, when the income generated by a government surcharge to consumers to fund the country s green transition known as EEG starts to outpace the payments made to the operators of the renewable assets. For 2019, the EEG will decline by 6 % to EUR/MWh due to a recent rise inwholesale power prices. German Power Futures EUR/MWh Y+1 Y+2 Y+3 12-MONTH LAST WEEK SP READ /MWh MOVING AVERAGE AVERAGE GE BL Y+2 vs Y GE BL Y+3 vs Y

19 ELECTRICITY Central Western Europe Electricity Futures Any new EPR reactor in France would require around 4-6 billions of euros in state aid, making it uncompetitive to rival sources of power supply, the French environment and energy management agency ADEME said. The agency estimates the state would have to invest at least 39 billions of euros to develop an EPR fleet with a capacity of 24 GW by 2060, which means that developing of nuclear industry would not be competitive for the French electrical system. The European regulatory agency ACER has proposed raising the threshold for day-ahead and intraday capacity on cross-border links in 13 nations to % of the maximum available. This threshold should then linearly increase in the following years, in order to reach the target of 75%... by 2026, Acer said last week, as it launched a consultation on the issue for the so-called Core region. As part of the clean energy package EU member states agreed in December last year to set a minimum target of offering at least 75% to the market, following a German proposal, but it s still unclear how it will be enforced. The European parliament, Council and Commission hope to agree on cross-border reforms by the end of the year, which along with the Acer regulation will complete the EU s set of rules. Central Western Europe Futures EUR/MWh SP READ VS GE P OWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE BE FR NL German Power BL Y+1 Belgium Power BL Y+1 France Power BL Y+1 NL Power BL Y+1 19

20 ELECTRICITY Belgian Power Market Belgium s nuclear regulator Fanc has approved the restart of Engie s Doel 4 (1 039 MW) nuclear reactor for 15 December, it announced on Saturday. The operator has resolved concrete degradation in an ancillary bunker building of Doel 4, Fanc said. In a separate statement, Engie said it expects Doel 4 to produce electricity again by 15 December. Belgian Power Futures EUR/MWh BE Y+1 BE Y+2 BE Y+3 20

21 ELECTRICITY Central Eastern Europe Electricity Futures Poland is likely to miss its 2020 renewable-energy target, although the far-right government is taking steps to transition away from coal and curb emissions, a study by environmental law firm ClientEarth said. Under the EU obligations, Poland has a goal to meet 15 % of its energy demand from renewable sources by 2020 but it seems that the country will focus instead on a 20 goal, which it has yet to adopt. The country has currently 9 GW of renewable capacities and upcoming auctions suggest that it could rise to 14 GW inthe coming years. Central Eastern Europe Futures EUR/MWh SP READ VS GE P OWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE PL RO CZ HU German BL Y+1 Romanian Power BL Y+1 Polish BL Y+1 Hungary Power BL Y+1 Czech BL Y+1 21

22 ELECTRICITY Electricity UK - Nordpool The British government intends to hold a top-up T-1 capacity auction in summer 2019 for delivery the following winter ( ), despite the European Court of Justice having cancelled the state aid approval given by the European Commission for the country's power capacity market. The agreements resulting from this auction will be conditional on the outcome of the commission s formal investigation. Assuming a favorable outcome of this investigation, the payments will for all the auctions will resume and their results would continue to be available. UK POWER SEASON +1, +2 GBP/MWh NORDPOOL Y+1 EUR/MWh Sum 2019 Win

23 ELECTRICITY Electricity Spain - Italy Italy will simplify its bidding zone for the day-ahead and intra-day makets from January, maintaining the current 6-zone geographical configuration but eliminating 3 of the 4 virtual bidding zones, grid operator Terna said. This change is unlikely to have any direct impact on the market prices; however, it puts an end to a revision process started in January that could have led to a deeper transformation ofthe Italian market. Combined heat and power plants in Spain will continue to require subsidies to remain profitable after an existing twoyear extension of state aid expires in 2020, sector lobby Acogen has said. Without the latest extension, dozens of plants would have been at the risk of closure, resulting in a spike in energy costs for industries, a loss of efficiency in the energy system and a remarkable increase in emissions the lobby said. SPAIN Y+1 EUR/MWh ITALY POWER BASELOAD Y+1, +2 EUR/MWh Y+1 Y+2 23

24 22/01/18 5/02/18 19/02/18 5/03/18 19/03/18 2/04/18 16/04/18 /04/18 14/05/18 28/05/18 11/06/18 25/06/18 9/07/18 23/07/18 6/08/18 20/08/18 3/09/18 17/09/18 1/10/18 15/10/18 29/10/18 12/11/18 26/11/18 10/12/18 19/02/18 5/03/18 19/03/18 2/04/18 16/04/18 /04/18 14/05/18 28/05/18 11/06/18 25/06/18 9/07/18 23/07/18 6/08/18 20/08/18 3/09/18 17/09/18 1/10/18 15/10/18 29/10/18 12/11/18 26/11/18 10/12/18 ELECTRICITY Short Range Marginal Cost SRMC stands for Short Range Marginal Cost and represents the marginal cost to generate electricity from either coal or natural gas. On the first graph, we compare the SRMC coal with German Baseload Power, and on the second the SRMC gas with German Peakload SRMC COAL vs GERMAN BASELOAD EUR/MWh SRMC API-2 Y+1 German Power BL Y+1 SRMC GAS vs GERMAN PEAKLOAD EUR/MWh SPREAD SRMC Coal API-2 vs German Power Baselaod Y+1 Gas NCG Y+1 vs German Power Peaklaod Y+1 TECHNICAL ASSUMPTIONS 12-MONTH MO VING AVERAGE LAST WEEK AVERAGE GAS COAL Efficiency Factor 50 % 36 % Management Cost SRMC NCG Y+1 German Power Peaklaod Y+1 24

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