Energy Market Update - Friday 12th May 2023
In the news this week
Britain’s wind farms generated more electricity in Q123 than gas for the first time. Britain is seeking to expand its wind generation as it tries to meet its goal of net zero emissions by 2050, which will also help the UK to become more energy independent. Almost a third of Britain’s electricity, 32.4%, came from wind farms in the first quarter of this year, compared with 31.7% from gas-fired power plants. Wind power rose by 3% when compared with the first quarter of 2022, while gas-fired generation fell by 5%. Altogether, renewable energy sources provided almost 42% of Britain’s electricity in the first quarter of 2023, with 33% coming from fossil fuels like gas and coal. The remaining electricity came from nuclear plants and from interconnector imports from abroad.
The recently launched European gas buying scheme has seen interest from over 65 European companies, while the bloc is also aiming for the first deals to be signed within the next few months. The scheme has been launched in order to help refill European gas storage as quickly as possible by allowing companies to pool their demand. In total, 101 firms have registered as buyers or sellers, while it is also thought that 19 of the companies that have signed up have done so as intermediaries for smaller firms. However, Eu officials have noted that some large European energy suppliers are reluctant to join the scheme, as they believe they can negotiate their own gas deals at competitive prices. This news may provide mixed signals, as it highlights the emphasis that is being placed on refilling storage as early as possible, but also how there is likely to be surge in buying pressure.
Fire fighters are battling widespread fires in Canada’s main oil producing province, but it could be months before all the blazes are under control. Alberta declared a state of emergency in response to wildfires that displaced nearly 30,000 people and promoted energy producers to shut in at least 280,000 boepd, more than 3% of Canada’s output. By Monday afternoon, 98 wildfires were still active, with nearly 30 classified as out-of-control. Canada is the world’s 4th largest crude producer, with around 80% of its oil coming from Alberta. Canadian daily natural gas exports to the US fell to 6.7 bcf, their lowest since April 2021. The UK may experience some upward market pressure as a result of a falling global supply.
Current Market Drivers
22 LNG cargoes are scheduled to arrive this month, likely offering downward pressure to near curve gas contacts.
Warming temperatures are not expected to offset the falling wind generation with day-ahead contracts experiencing upward movement as a result.
Unions in the UK have threatened a “tsunami” of 48-hour strikes across the North Sea over pay and conditions, which is likely to supply some upward pressure to near curve contracts.
On Thursday 27th April, Nick Gauntlett, CEO of Dukefield Energy provided a webinar on the latest energy market news and contracts advice, in partnership with Crescent Purchasing Consortium. Click here to watch the recording.