WEEKLY ENERGY MARKET REVIEW

Transcription

1 WEEKLY ENERGY MARKET REVIEW WEEK 43, 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. The price declined, stimulated by the bearish correction of the spot contracts. The price slightly rose, driven by the rise of the coal contracts. This rise was tempered by the decline of the CO2 market. Outlook (Horizon 1 Week) : Outlook (Horizon 1 Week): Outlook (Horizon 1 Week): A test of the support level of $/bbl, followed by a bullish correction. A test of the support line of /MWh, followed by a bullish rebound. The apparition of a new support level in the current price interval, 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+1-4.3% Poland Power BL Y+1-2.7% Spain Power BL Y+1-1.0% Italy Power BL Y+1-2.3% Netherlands Power BL Y+1-3.5% Germany Power BL Y+1-3.0% France Power BL Y+1-3.7% Netherlands Gas TTF Y+1-2.6% France Gas PEG Nord Y+1-2.1% Germany Gas NCG Y+1-2.7% UK Gas NBP Y+1-3.3% Poland Gas Y+1-3.2% Italy Gas PSV Y+1-3.0% Coal API-2 Y+1-0.7% CO2 Dec % Gasoil M+1-3.1% Brent M+1-3.5% -10% -5% 0% 5% 10% 15% 20% 25% % 3

4 OVERVIEW The European currency continued its decline against the U.S. dollar, driven by a lower than expected value of the European Consumer Price Index for September 2018 and the concerns regarding a possible Hard Brexit. This week, the main economic events in the European Union are the announcement of the ECB Interest Rate Decision along with the publication of the ECB Monetary policy statement and the following 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 declined, influenced by the recent uptick in U.S. inventories and the declarations of the Saudi Energy Minister that his country will play a responsible role in energy markets. According to Reuters, an unprecedented volume of Iranian crude oil is set to arrive at China s northeast Dalian port this month and in early November before U.S. sanctions on Iran take effect. So far, a total of 22 million barrels of Iranian crude oil loaded on supertankers owned by the National Iranian Tanker Co (NITC) are expected to arrive at Dalian in October and November, the data showed. Dalian typically receives between 1 million and 3 million barrels of Iranian oil each month, according to the data that dates back to January Iraq is seeking to produce 7 Mbl/d through its newly established National Oil Company and to export 4 Mbl/d in 2019, Oil Minister Jabar al- Luaibi said. In an interview with state television, Luaibi said Iraq hoped to export 1 Mbl/d through Jordan s Akaba port, without specifying a timeline. The burning of gas produced as a byproduct of oil extraction would stop by 2021, he said. Brent Oil M+1 - $/bbl Gasoil M+1 - /ton

7 OIL Norway's crude oil production plunged by 13% on the month in September and was down 8% on the year in the first 9 months as technical difficulties and maintenance took their toll ahead of expected field start-ups in the next few years, figures from the Norwegian Petroleum Directorate showed. The country produced 1. Mbl/d of crude and 1.61 Mbl/d of liquids overall in September, continuing to fall short of the NPD's forecasts, as has happened throughout the year. Over the first 9 months, crude production was 1.48 Mbl/d and overall liquids output was 1.85 Mbl/d 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 rose, driven by the decline of the temperatures and the market s anticipation of increased generation demand over the coming months. Despite these gains, the physical market is under pressure as the high level of stocks at the European terminals makes very difficult to receive further cargoes. The water levels on the main indication point of Kaub on the Rhine are expected to fall at a record low level of 23 cm well below the previous historical low of 35 cm seen in This phenomenon caused severe disruptions to the inland coal barge transportation. As a result, the coal inventories at northwest European dry bulk terminals are at their highest levels for more than 3 years 6.3 Mt. COAL API2 (In USD/ton) Y+1 Y+2 Y+3 8

9 CO2 The carbon price continued its decline, pushed by the fears of an eventual selloff which may occur in case of a Hard Brexit. According to estimations, the UK installations could sell around 85 M of EUAs in this scenario. At the beginning of this week the decline continued, stimulated by the bearish correction of the power and gas markets. The European carbon market has entered in a 10 year deficit of supply that could see the prices rise to 65 EUR/t by 2020, according to Lawson Steele of Berenberg Bank. We thought previously that this deficit will start in 2019, but there has been such a high volume of buying from RWE and speculators that we now think the market is in deficit this year, Steele declared at the Carbon Forward conference in London. According to his estimations, the 2018 deficit will amount to around 217 M of EUAs. EU CARBON (In EUR/ton) EUA Dec 18 CER Dec 18 9

10 NATURAL GAS Natural Gas Storage Total EU 28 : Date: % 96% 95% 54% 87% 92% 94% 75% 97% 60% 76% 10

11 NATURAL GAS LNG Storage Total EU 28 : Date: % 91% 67% 73% 55% 77% 87% 71% 11

12 NATURAL GAS Oil linked natural gas premium at 2.23 EUR/MWh Oil linked natural gas price (EUR/MWh) Oil linked gas price Cal Y+1 Oct Oct Evolution +0.02% Forecast TTF gas Cal Y+1 Oil linked gas price Cal Y+1 Premium [Oil linked gas] - [ZEE TTF average] 12

13 17/12/ /12/ /01/ /01/ /02/ /02/ /03/ /03/ /04/ /04/ /05/ /05/ /06/ /06/ /07/ /07/ /07/ /08/ /08/ /09/ /09/ /10/ /10/2018 NATURAL GAS The price declined, stimulated by the warm temperatures and a good level of supply. However, temperatures are expected to fall below the norm at the end of this week, which could make the price rise back 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 The TTF futures declined, influenced by the bearish correction of the spot price and the decline of the European energy complex. The Dutch senate passed last week a bill to minimize natural gas production from the Groeningen gas field, bringing the ultimate control over its output into government hands. From now on, field operator NAM will be legally obliged to produce never more than necessary, as calculated by grid operator GTS, even if it will be no longer profitable. The bill will come into full effect from the start of the gas year 2019/20. Production in the gas year 2017/18 was 20.1 bcm, below the initial cap of 21.6 bcm TTF Forward Prices EUR/MWh Spread /MWh 12-Month moving average Last Week average TTF Y+2 vs Y TTF Y+3 vs Y Y+1 Y+2 Y+3 14

15 11/4/ /20/ /6/ /22/2017 1/7/2018 1/23/2018 2/8/2018 2/24/2018 3/12/2018 3/28/2018 4/13/2018 4/29/2018 5/15/2018 5/31/2018 6/16/2018 7/2/2018 7/18/2018 8/3/2018 8/19/2018 9/4/2018 9/20/ /6/ /22/2018 NATURAL GAS Gazprom expects its gas sales to Europe and Turkey to exceed 200 Bcm in 2018 and is closing in on annual sales of 205 Bcm, with the level of supplies now close to the contractual maximum of its customers, its CEO Alexei Miller said. Miller said also that Gazprom would definitely break last year's record of 194 Bcm in gas sales in the "Far Abroad" (Europe plus Turkey, but not the countries of the former Soviet Union). Main European Hubs Gas Prices EUR/MWh Spread vs TTF 12-Month moving average Last Week average PSV (IT) PEG NORD (FR) NCG (GE) Nasdaq Commodities exchange will launch monthly futures on the new French PEG virtual gas hub from 1 November. The new product was tested and approved by the national energy regulator CRE, the exchange said. France will merge its 2 gas hubs PEG Nord and TRS on 1 November, which is expected to boost the liquidity of the country s gas market. The new monthly contract will settle against the ICIS Heren PEG daily ahead and weekend midpoint assessments. At the moment, the Paris-based Powernext is the dominant exchange in the French gas market. NBP Gas Futures GBP/therm TTF Y+1 NCG Gas Y+1 IT PSV Gas Cal Y+1 PEG Nord Y+1 Sum19 Win 19 15

16 NATURAL GAS Asian spot LNG prices fell for the fourth week in a row, oscillating at their lowest in 2 months, amid increased supply disponibilty of a new project in Australia and expectations of more from the United States. Another reason is the absence of the Chinese buyers, as they look towards longer term supplies ahead of winter. Total and China s CNOOC have strengthened their existing partnership in the LNG sector to increase their output. The 2 companies said they had agreed to increase the contract volume from 1 million tons per annum (Mtpa) to 1.5 Mtpa of LNG, sourced from Total s global LNG portfolio, and added they had extended the term of contract to 20 years. A sustained US-China trade war into the next decade may increase average global LNG prices by 2%, BRG Chair and Managing Director Christopher Goncalves said in an interview. The impact will be particularly felt during the peak winter demand season, he added. According to his estimations, US exports to Europe might decrease by 7.7 Bcm/year, and exports to Asia by 11.3 Bcm/year. In the same time, China's LNG imports could be cut by 5 Bcm/year, but compensated partially by additional pipeline imports of about 4.4 Bcm/year from Central Asia and Russia, he said. According to S&P Global Platts Analytics, China has imported nearly 50 bcm of LNG in 2018 to date. 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 declined, influenced by forecasts of strong wind generation. According to analysts, the coal transportation disruption due to falling Rhine levels is not adequately priced into German power prompt and near curve products. One market participant called the situation worrying given that November tends to be the month during which water level falls to their lowest. According to the weather forecasts, water levels are unlikely to rise, a spokesman for the Rhine Shipping Authority said. The precipitations are likely to come in the form of snow in the Alps and therefore not reach the river. 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 stimulated by the bullish movement of the coal contracts. However, this rise was tempered by the downward correction of the carbon market. The average cost of German onshore wind projects rose 1 EUR to EUR/MWh in the latest round of auctions, the BNA network regulator announced. Investors submitted bids for just 400 MW of the 670 of capacity on offer. Most of the successful bids were awarded in Bavaria (69 MW) followed by Brandenburg (63 MW) and Lower Saxony (42 MW). The lowest bid came at 50 EUR/MWh and the highest at 63 EUR/MWh. 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 EDF told to the ASN that it will no longer operate its Fessenheim reactors after their latest inspections, planned in September 2020 for unit 1 and in August 2022 for unit 2, the regulator announced at the beginning of this week. EDF had asked the safety authority to modify some of its safety demand that were no longer adapted to the situation of Fessenheim, considering the definitive shutdown of the reactors the ASN added in a statement Central Western Europe Futures EUR/MWh SPREAD VS GE POWER 12-MONTH MOVING AVERAGE LAST WEEK AVERAGE BE FR NL The rivals of EDF are unhappy at government plans to reform the ARENH mechanism, complaining that their views were ignored. According to the new rules, the ARENH volumes will be distributed on a quarterly basis, as opposed to an annual basis currently. These changes were made in order to target the speculative behavior. From their part, the alternative suppliers wanted the authorities to raise the current 100 TWh limit for the ARENH volumes to a ceiling of 150 TWh. EDF, meanwhile, has called for the scrapping of the mechanism German Power BL Y+1 Belgium Power BL Y+1 France Power BL Y+1 NL Power BL Y+1 19

20 10/23/ /6/ /20/ /4/ /18/2017 1/1/2018 1/15/2018 1/29/2018 2/12/2018 2/26/2018 3/12/2018 3/26/2018 4/9/2018 4/23/2018 5/7/2018 5/21/2018 6/4/2018 6/18/2018 7/2/2018 7/16/2018 7//2018 8/13/2018 8/27/2018 9/10/2018 9/24/ /8/ /22/2018 ELECTRICITY Belgian Power Market Belgian Power Futures EUR/MWh Regulatory costs for wind farm in Belgium total around 26.4 EUR/MWh, more than twice compared to Germany, a study made by Agora Energiewende showed. To make up for this difference, a wind park in Belgium would need to produce 20 % more power than its counterpart in Germany, Agora Energiewende said in a statement. Among the 6 countries covered by the study, Austria had the second regulatory cost of above 20 EUR/MWh, while France was around 20 EUR/MWh and Switzerland and the Netherlands between 15 EUR/MWh and 20 EUR/MWh BE Y+1 BE Y+2 BE Y+3 20

21 ELECTRICITY Central Eastern Europe Electricity Futures Poland has no need for new electricity links with its neighbors because we are self-sufficient, the country s energy minister said in an interview. His comments came after Polish media reported last month that the country s TSO PSE is planning a 600 MW undersea link with Denmark by The country has currently cross-border power links with Czech Republic, Germany, Lithuania, Slovakia and Sweden 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 In case if the UK will maintain the level of its current carbon price floor, the country will exit the coal-fired generation by 2022, a report published by Aurora Energy Research showed. By contrast, the analysis shows that if the government will reduce the carbon price support to 7 GBP/t, this would result in coal power stations remaining on the system until 2025 and generating an average of 12 TWh per year. UK POWER SEASON +1, +2 GBP/MWh NORDPOOL Y+1 EUR/MWh Sum 2019 Win

23 ELECTRICITY Electricity Spain - Italy Spain could lead the next European fuel switching wave from coal-fired generation to gas, as the country s fleet of combined cycle gas turbines (CCGT) is among the most efficient on the continent, the head of research of the think tank Carbon Tracker said at a conference. He pointed that the Spanish CCGT plants have a 55.6 % efficiency, more than 10 % over their German counterparts and significantly above the 38.5 efficiency of the coal plants. If current gas prices were sustained and carbon prices reached 40 EUR/t, Spain will add 42 TWh in gas-fired capacity, according to Carbon Tracker estimates. SPAIN Y+1 EUR/MWh ITALY POWER BASELOAD Y+1, +2 EUR/MWh Y+1 Y+2 23

24 6/11/17 20/11/17 4/12/17 18/12/17 1/01/18 15/01/18 29/01/18 12/02/18 26/02/18 12/03/18 26/03/18 9/04/18 23/04/18 7/05/18 21/05/18 4/06/18 18/06/18 2/07/18 16/07/18 /07/18 13/08/18 27/08/18 10/09/18 24/09/18 8/10/18 22/10/18 1/01/18 15/01/18 29/01/18 12/02/18 26/02/18 12/03/18 26/03/18 9/04/18 23/04/18 7/05/18 21/05/18 4/06/18 18/06/18 2/07/18 16/07/18 /07/18 13/08/18 27/08/18 10/09/18 24/09/18 8/10/18 22/10/18 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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