WEEKLY ENERGY MARKET REVIEW

Transcription

1 WEEKLY ENERGY MARKET REVIEW WEEK 42, 2018

2 Last Week at a glance! BRENT M+1 GAS TTF Y+1 POWER GE Y $/bbl /MWh /MWh The price declined, influenced by the rise of the U.S. oil stocks and the bearish expectations regarding the rise of the world oil demand, announced by the IEA and OPEC. The price dropped, following the downward trend in spot contracts, lower European power prices and bearish oil markets. After an initial rise, the continued its decline, stimulated by the fall of the CO2 prices. Outlook (Horizon 1 Week) : Outlook (Horizon 1 Week): Outlook (Horizon 1 Week): A smooth rise to the resistance level of $/bbl. A test of the support line of /MWh, followed by a bullish rebound. A new test of the support level of /MWh, followed by a bullish rebound. 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+1-2.4% Poland Power BL Y+1-1.0% Spain Power BL Y+1 0.0% Italy Power BL Y+1-1.4% Netherlands Power BL Y+1-0.8% Germany Power BL Y+1-1.7% France Power BL Y+1-3.4% Netherlands Gas TTF Y+1-2.2% France Gas PEG Nord Y+1 0.1% Germany Gas NCG Y+1-1.2% UK Gas NBP Y+1-4.1% Poland Gas Y+1-1.7% Italy Gas PSV Y+1-1.2% Coal API-2 Y+1-3.1% CO2 Dec % Gasoil M+1-0.7% Brent M+1-2.6% -10% -5% 0% 5% 10% 15% 20% 25% % 3

4 OVERVIEW The European currency declined against the U.S. dollar, driven by a lower than expected value of the U.S Consumer Price Index for September 2018 and the fears regarding the trade war between the United States and China. This week, the main economic event in the European Union is the publication of the European Consumer Price Index for September 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 declined, stimulated by the rise of the U.S. oil stocks and the bearish forecasts regarding the rise of the world oil demand made by the OPEC and the IEA. At the beginning of this week, the price slightly rose, influenced by the political tensions between the United States and Saudi Arabia In its monthly oil market report, the IEA lowered its oil demand growth forecasts for 2018 and 2019 by bl/d, to 1.3 Mbl/d and 1.4 Mbl/d, citing currency depreciations, trade disputes and revisions to its data on China. The world has reached "twin peaks for demand and supply by straining parts of the system to the limit," the IEA said. Non-OPEC output is forecast to expand by 2.2 Mbl/d and 1.8 Mbl/d in 2018 and 2019, respectively, led by the United States. These conclusions were largely confirmed by OPEC. The cartel cut its forecast of global demand growth for oil next year for a third straight month on Thursday, citing headwinds facing the broader economy, and key consuming countries in particular, from trade disputes and volatile emerging markets. OPEC expects the world oil demand would increase by 1.36 Mbl/d next year, marking a decline of bl/d from its previous estimate. The group also cut the estimate for demand in 2019 for its own crude by another bl/d from last month to 31.8 Mbl/d, which in turn marks a decline of bl/d from the projection for Brent Oil M+1 - $/bbl Gasoil M+1 - /ton

7 OIL China's crude oil imports for independent refineries in October is expected to rise about 23.9% from September to 2.1 Mbl/d, due to strong refining demand and low inventory while as more refiners rush to use up the quotas by end-2018, a survey by S&P Global Platts showed. The expected volume in October would be also higher than their average imports of 1.93 Mbl/d in the first 9 months of the year, and the 1.76 Mbl/d in the same month of last year. Independent refiners usually start to lift their throughput in August and September, and push run rates to annual highs in December, Platts' data for last 3 years show OPEC Crude Oil Production Mbbl/day Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 US: Crude Oil Stocks Mbbl (source: EIA) 7

8 COAL The European coal price declined, in line with the related energy complex and influenced by a high amount of stocks at the European s terminals which can t be delivered at the plants due to low river levels. As a result, the market participants expect a bullish correction once river levels will rise to normal. Chinese coal and lignite imports declined by 7.2 % year on year in September to a 4-month low of 25.1 Mt due to a high level of stocks, customs data showed. The September imports were 9.4 % lower than in the previous month. However, the imports in January-September period rose 11.3 % year on year to Mt as a shortfall in domestic output increased the demand for imported coal. COAL API2 (In USD/ton) Y+1 Y+2 Y+3 8

9 CO2 The carbon price continued its decline, stimulated by the continuation of a strong sell-off movement. The decline was also influenced by the bearish correction of the European energy complex, the fall of the coal contracts and especially by the growing fears regarding an eventual hard Brexit which will make the British companies sell a huge amount of EUAs on the market in the first months of The UK will quit the EU s emissions trading scheme in the event of a nodeal Brexit, but will continue to enforce a price on emissions if the country leaves the bloc without an agreement, according to a government report. The document warned that in the event of no deal, any EU ETS allowances issued by the UK for the 2019 compliance cannot be used by the UK operators to meet their compliance obligations. EU CARBON (In EUR/ton) EUA Dec 18 CER Dec 18 9

10 NATURAL GAS Natural Gas Storage Total EU 28 : Date: % 84% 94% 54% 84% 91% 93% 54% 97% 57% 74% 10

11 NATURAL GAS LNG Storage Total EU 28 : Date: % 54% 37% 53% 62% 61% 97% 63% 11

12 NATURAL GAS Oil linked natural gas premium at 2.16 EUR/MWh Oil linked natural gas price (EUR/MWh) Oil linked gas price Cal Y+1 Oct Oct Evolution -0.18% Forecast TTF gas Cal Y+1 Oil linked gas price Cal Y+1 Premium [Oil linked gas] - [ZEE TTF average] 12

13 10/12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /08/ /08/ /09/ /09/2018 /09/ /10/2018 NATURAL GAS The TTF spot price fell, because of warmer weather in Europe. On Monday, the TTF spot closed at EUR/MWh, as reduced wind generation led to a decline in gas-forpower demand. It nevertheless slumped by 3.8% (-1.04 EUR/MWh) for the week. The European gas storage facilities began last week-end to release more supply than they injected, for the first time since April. Their last level stood at nearly 84 % - 4 percentage points below the level recorded for the same period of TTF SPOT EUR/MWh 76 EUR/MWh on 01/03/2018 Market Average Period Price /MWh Month M-12 October Month M-1 September Month M October Current Year Year Y

14 NATURAL GAS Last week, the TTF contracts on the curve were predominantly bearish, tracking the downward evolution in European power prices and lower gas spot prices. Moreover, weaker oil markets weighed down on prices. The TTF contract for delivery in 2019 settled down at EUR/MWh on Monday, posting a 3% (-0.76 EUR/MWh) loss for the week TTF Forward Prices EUR/MWh Spread /MWh 12-Month moving average Last Week average TTF Y+2 vs Y TTF Y+3 vs Y Maintenance at Norway s natural gas fields and processing plants is scheduled to cut production capacity by some 7 bcm in 2019, at the high end of cuts seen in recent years, data from system operator Gassco showed. The scope of outages announced so far for 2019 is 3 bcm bigger than that of 2017, a year of exceptionally low maintenance, and is expected to be at least as high as that of 2018, a Reuters comparison showed. For 2018, the analysts expect the amount of maintenance-related reductions to be around 5 7 bcm Y+1 Y+2 Y+3 14

15 10/28/ /13/ /29/ /15/ /31/2017 1/16/2018 2/1/2018 2/17/2018 3/5/2018 3/21/2018 4/6/2018 4/22/2018 5/8/2018 5/24/2018 6/9/2018 6/25/2018 7/11/2018 7/27/2018 8/12/2018 8/28/2018 9/13/2018 9/29/ /15/2018 NATURAL GAS Shale gas firm Cuadrilla was given the goahead to start fracking at a well in Lancashire, northwest England, by the government, though it had faced a legal challenge from anti-fracking campaigner Bob Dennett in the High Court. The British Geological Survey has estimated that the Bowland Shale play holds an estimated 37.6 Tcm of gas -- the UK currently uses about 80 Bcm/year. The opposition Labour party said last year it would ban fracking if it came to power, following on from several Continental European countries having already done so. RWE is re-opening a mothballed gas-fired power plant in the Netherlands, citing more attractive prices and rising demand for flexible generation. The Claus C (1 4 MW) power plant was commissioned in 2012 and closed in 2014 as profits for gasfired generation declined. The plant is expected to start in Earlier, ICIS reported that RWE and Engie are cancelling their plans to mothball several of their Dutch gas-fired plants as the profitability of burning gas for peakload demand rose. Main European Hubs Gas Prices EUR/MWh NBP Gas Futures GBP/therm 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) PEG NORD (FR) NCG (GE) Sum19 Win 19 15

16 NATURAL GAS Asian spot LNG prices continued their decline as sellers struggled to offload the last of their November cargos and Chinese demand for December supplies failed to materialise significantly after a frenzy of Asian buying last month. Total SA is in talks to buy up to half of Adani Group's stake in LNG projects in Gujarat and Odisha, an under-construction LNG import facility and in its city gas projects, sources privy to the development said. The French operator is also looking at buying a 50 per cent stake in under-construction LPG import terminal that Adani is building at Mundra in Gujarat. According to analysts, India is looking at more than doubling the share of natural gas in its energy basket to 15 per cent in next few years. South Korea's state-run Korea Gas Corp. has started preparations for new term contracts to replace expiring contracts, and has sought to diversify LNG supply sources beyond the Middle East and Southeast Asia, the company's vice president announced. Kogas 2 long-term contracts worth 3 Mmt/year expired in Mmt/year from Malaysia's MLNG II project and 1 Mmt/year from Brunei's BLNG. A -year contract with Indonesia's Badak project under which Kogas had imported 1 1Mmt/year had also expired late last year, 7 more long-term contracts, worth Mmt/year, are scheduled to expire before 20. Henry Hub (USA), TTF (EU), JKM (Japan) SPOT USD/MMbtu Asian LNG Spot Natural Gas Henry Hub Natural gas TTF 16

17 ELECTRICITY The German spot price strongly rose, driven by an unusual low wind generation forecast. The auction of 4.9 GW of crossborder capacity from Germany to Austria has seen the price to rise around 6-fold from a month ago, data from the Joint Allocation Office showed. The capacity of power from Germany to Austria settled at 5.75 EUR/MWh compared with 0.88 EUR/MWh for cross-border flows in October. A total of 59 market participants requested 54.8 GW, with 44 receiving a share of the available 4.9 GW. German Power Day Ahead Baseload EUR/MWh MARKET AVERAGE PERIOD PRICE /MWh Month M-12 October Month M-1 September Month M October Current Year Year Y

18 ELECTRICITY The German futures slightly rose in line with the recovery of the European fuel complex. However, at the beginning of this week, the price fell back following the losses on the carbon market. German clean energy levy used to fund the country s transition to renewable energy will fall to 64 EUR/MWh in 2019, the country s 4 grid operators announced. The TSOs 50Hertz, Amprion, Tennet and TransnetBWattributed this decline to rising wholesale power prices, which allowed clean energy investors to recover more of their costs from the market prices. In 2018, the levy is at EUR/MWh which represents the second consecutive year of reductions since Germany began using this surcharge. The TSOs projected renewable energy generation to reach 217 TWh next year, up 13 TWh year on year. German Power Futures EUR/MWh MONTH LAST WEEK SPREAD /MWh MOVING AVERAGE AVERAGE GE BL Y+2 vs Y GE BL Y+3 vs Y Y+1 Y+2 Y+3 18

19 ELECTRICITY Central Western Europe Electricity Futures Belgian nuclear safety authority Fanc has declared flaws in concrete affecting four Belgian reactors as a level 1 risk on an official scale that could increase risks of an accident, it said on Friday. The conclusion is that this issue of concrete calls into question the availability of emergency systems which increases the risks in case of external accident the regulator said. The International Nuclear and Radiologic Event Scale ranks nuclear events from 0 to 7, depending on their severity. 80 Central Western Europe Futures EUR/MWh SPREAD VS GE POWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE BE FR NL The rise of the EEX German power liquidity supported European trade exchange volume in the third quarter of This volume rose relative to OTC market for the third straight quarter, bringing OTC s share from the combined total down to 73 %, below its post average of 74 %. OTC liquidity fell 10 % year on year in markets outside of Germany, while exchange volumes increased by 27 %. 20 German Power BL Y+1 Belgium Power BL Y+1 France Power BL Y+1 NL Power BL Y+1 19

20 10/16/ // /13/ /27/ /11/ /25/2017 1/8/2018 1/22/2018 2/5/2018 2/19/2018 3/5/2018 3/19/2018 4/2/2018 4/16/2018 4//2018 5/14/2018 5/28/2018 6/11/2018 6/25/2018 7/9/2018 7/23/2018 8/6/2018 8/20/2018 9/3/2018 9/17/ /1/ /15/2018 ELECTRICITY Belgian Power Market Belgian Power Futures EUR/MWh Belgian electricity contracts on the curve had a predominantly downward trend, due to a bearish European fuel complex and losses in the carbon market. The contract for delivery in 2019 ended at EUR/MWh on Monday, or 4.6% (-3.28 EUR/MWh) lower for the week. The biggest weekly loss was observed in the contract for delivery in Q2 and Q3 2019, which traded at and EUR/MWh respectively, tumbling by around 6.9% (around 4 EUR/MWh) week-on-week. Problems with concrete affecting several Belgian nuclear reactors and lower wind generation boosted the spot power price on a weekly basis. The electricity price for day-ahead delivery in Belgium rose by around 1% (+0.72 EUR/MWh) for the week. It jumped to EUR/MWh on Monday, mainly after the Tihange 1 reactor was closed manually on October 13th for the periodic maintenance of the reactor The Belgian nuclear safety authority Fanc has declared that flaws in concrete affecting four Belgian reactors are considered as a level 1 risk on an official scale, that are likely to increase risks of an accident, it said on Friday. The conclusion is that this issue of concrete calls into question the availability of emergency systems which increases the risks in case of external accident the regulator said. The International Nuclear and Radiologic Event Scale ranks nuclear events from 0 to 7, depending on their severity. BE Y+1 BE Y+2 BE Y+3 20

21 ELECTRICITY Central Eastern Europe Electricity Futures According to ICIS estimations, the Polish power prices will continue to rise and will reach a peak in 2024 at price level of EUR/MWh, with rising carbon prices being the main bullish driver. The ICIS model expect the phase-out of the Polish coal plants to be outpaced by the climbing prices of EUAs. After 2024 the prices will fall, stimulated by falling prices of EUAs, increased share of renewable energy, including currently non-existing offshore wind. Central Eastern Europe Futures EUR/MWh SPREAD VS GE POWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE PL RO CZ HU German Power BL Y+1 Polish Power BL Y+1 Romanian Power BL Y+1 Hungary Power BL Y+1 Czech Power BL Y+1 21

22 ELECTRICITY Electricity UK - Nordpool According to the UK gas and electricity market regulator Ofgem, the 6 largest power and gas suppliers of the United Kingdom saw their profits dive by 10% in 2017, from 1bn to 900m and their market shares erode by a combined 5 percentage point, due to a fiercer market competition. 73 energy suppliers are now competing on the market. Between June 2017 and June 2018, smaller suppliers gained 1.4 million customers, who were previously supplied by the Big Six, as switching rates reached a record high. 25% of UK's gas customers and 24% of power customers. UK POWER SEASON +1, +2 GBP/MWh NORDPOOL Y+1 EUR/MWh Sum 2019 Win

23 ELECTRICITY Electricity Spain - Italy The Spanish government announced its intention to pursue market reforms to curb windfall profits from hydropower and nuclear generators. However, the government provided no details about what the reforms could entail and it remains to be seen if the measures will be approved by the parliament. Certain analysts expect the introduction of a price cap, similar to the French mechanism of ARENH. SPAIN Y+1 EUR/MWh ITALY POWER BASELOAD Y+1, +2 EUR/MWh Y+1 Y+2 23

24 /10/17 13/11/17 27/11/17 11/12/17 25/12/17 8/01/18 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 27/11/17 11/12/17 25/12/17 8/01/18 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 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 MOVING 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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