Both gas and power wholesale has continued to decline in the first part of February. This has mainly been driven by the short-term market. Temperatures have been significantly above average for the time of year, so domestic gas demand is down and storage levels are strong. There are also few gas supply issues, with abundant LNG deliveries and no notable North Sea issues. The weather has also been windy, so renewable generation is delivering a larger proportion of electricity than is typical. Hence short-term bearish sentiment translates to the Annuals, with the April ’19 Annual now at a 7-month low. There has also been downward pressure from lower coal and carbon prices.

Further out, the bearishness is somewhat curtailed by the influence of oil. Brent Crude is at its highest point of 2019, with the OPEC cuts and significant uncertainty surrounding Venezuela pushing prices. This means that for power wholesale, the discount has narrowed for future annuals versus 2019.

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