Eneco market reports mid June 2021
Markets resumed their bullishness in early June, as temperatures soared and wind generation remained sluggish. Gas supplies were constrained by outages in North Sea and Norwegian fields, lower than slated supplies from Russia, and limited LNG deliveries diverted by high cooling demand and increasing prices in Asia. Meanwhile demand was boosted by the ongoing successful UK vaccine rollout, and increase cooling demand here.
The wider energy complex further fuelled the rising markets. Oil rose to $74/barrel, coal to $84/tonne, and carbon hovered between 50 to 54 Euro/TCO2 all buoyed by increased global economic activity.
Lower temperatures and higher wind output, expected to persist for the next week, are having little effect in stalling the increases. For the moment the market remains heavily backwardised – far season prices are less expensive than near seasons due to the current supply issues.
There is some positive news with healthy French nuclear output available for the summer, and the Norway-UK interconnector and Nordstream 2 both expected to be fully operational in Q4.
Supply outages –Norwegian gas production outages are likely to continue until June 24th.
Oil markets – Oil has risen above $74/barrel as global fuel demand increases. Iranian oil exports are expected to re-commence later this year.
Gas storage – European storage is at 41%, compared to 77% this time last year. European storage is not expected to be full by Winter.
Coal – Prices reached $84/tonne, with reduced supply and strong Chinese buying.
LNG – LNG deliveries are being diverted by strong buying and higher prices on Asian markets. LNG markets have increased by 7.5% in June.
Carbon costs – EUETS have maintained their recent highs trading between 50 to 54 Euro/TCO2
Norway-UK interconnector – has been commissioned and is expected to be fully operational by October 2021.
Brit-Ned interconnector – is now back online.
Nordstream 2 – is now due for completion in Q4, following the US dropping its sanctions.
Vaccine rollout – Although the UK vaccine rollout continues apace, there will be a month long delay to the lifting of further restrictions.
Could go either way:
Sterling – has continued to strengthen against both the Dollar and Euro shielding the UK energy markets for some of the impact of oil, coal and carbon price increases. The continued rollout of the UK’s vaccination programme will influence its future direction.
Weather – Cooler temperatures expected for the coming week are boosting demand for limited gas supplies. Stronger wind generation may counterbalance this.
On the electricity side organisations will see further increases in pass through costs from both government and industry infrastructure providers from 2022 onwards due to pandemic-related demand destruction. Levies normally collected via unit rates have fallen short of expectations and have fed through to further increases in ROs, FiTs, EII and other transportation, distribution and renewable investment charges. Targeted Charging Review will now take affect from April 1st 2022, one year later than expected, but are now being built into longer term contracts. Revised projections are available on our website via the links below.
Is your organisation covered by the new Streamlined Energy and Carbon Reporting (SECR) scheme from the Environment Agency?
Designed to replace in part the Carbon Reduction Commitment (CRC) which ended in 2019 and to follow on from the energy savings recommendations generated by ESOS compliance. Note, SECR will cover a wider scope of organisations than CRC and ESOS do. SECR requires all large enterprises to disclose within their annual financial filing obligations to Companies House, their greenhouse gas emissions, energy usage (from gas, electricity and transportation as a minimum), energy efficiency actions and progress against at least one intensity ratio.
If your organisation qualifies, participation in this scheme is mandatory. Eneco Consulting are happy to provide assistance with your regulatory obligations. Full details are available on our website on the link below.
Are you eligible for an EII rebate?
Under current rules, if you qualify at an industry sector level and your business passes the 20% electricity intensity test you may qualify for exemption to CFD and RO charges. Please see the attached Government RO/CFD guidance document and update and give Abby a call on the main number to discuss this further.
A copy of our environmental charges and Climate Change Levy rates from 2012 to date: Environmental Pass Through Charges and CCL with Definitions ppkWh 02.12.20
A copy of RO/CFD guidance document: RO_CFD_Guidance_Revised_July_2018
SECR: SECR EA Guidelines
TCR Charges (Targeted Charging Review this will be revised shortly): TCR Charges (Targeted Charging Review)