The last fortnight has been generally bullish across power, gas and the wider energy complex. The main driver has been the sharp rise in carbon costs, briefly hitting a 14-year high in excess of €30 / tonne. There has been some speculative purchasing of allowances and carbon costs will be higher with a more significant fossil fuel burn this winter. However, the indication is that the main reason for carbon purchase is down to the expectation of a green economy boost post-covid.

Markets have been kept in check somewhat by the news that French nuclear shutdowns will not be as pronounced as first envisaged for Winter ’20. This brings a large volume of relatively cheap generation back to the mix at a crucial time, and French wholesale has dropped accordingly.

Elsewhere, we have seen Brent crude consolidating around the $43 mark – this is the highest since early March, but of course in context is still well below the near $70 level seen in January. There may be some reversal here in the coming weeks as OPEC+ eases production cuts and volumes increase. A lower oil price may give downward sentiment to power and gas. Not only will there be more oil produced, but the key oil markets of Brazil, the US and India are amongst the hardest hit by C-19 – hence, a lack of demand may hurt prices further.

Back