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The Brent and CO2 prices fell due to the uncertainty generated by the second wave of COVID 19

AleaSoft, October 29, 2020. The uncertainty due to the measures to stop the second wave of COVID‑19 is beginning to be felt in the energy markets. The Brent futures fell below $40/bbl, reaching the lowest value since the end of May. The CO2 prices also reacted downward and were close to €23/t. The gas fell from the €15/MWh reached in the fourth week of October but it is still above €14/MWh. In most of the European electricity markets, the increase in wind energy production favoured lower prices.

Photovoltaic and solar thermal energy production and wind energy production

The average solar energy production of the first three days of the week that began on October 26 increased by 33% in the Iberian Peninsula and by 3.9% in the French market compared to the average of the previous week. On the contrary, in the German market it decreased by 31% and in the Italian market by 8.8%.

Between October 1 and 28, the solar energy production increased by 45% in the Iberian Peninsula and by 6.6% in the French market compared to the same days of 2019. In the Italian market it remained with very little variation, while in the German market, the production decreased by 7.8%.

The analysis carried out at AleaSoft indicates that at the end of the last week of October, the solar energy production in the German market will be lower than that registered during the previous week, while in the Italian market it is expected to remain with little variation.

AleaSoft - Solar photovoltaic thermosolar energy production electricity EuropeSource: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.
AleaSoft - Solar photovoltaic production profile EuropeSource: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.

The average wind energy production between Monday, October 26, and Wednesday, October 28, increased by 158% in the Italian market compared to the average registered during the previous week. In the markets of Germany and France the increase was 20% and 19% respectively. On the contrary, in the Iberian Peninsula, the production with this technology decreased by 15%.

In the year‑on‑year analysis, during the first 28 days of October, the production with this technology increased in all the European markets analysed at AleaSoft. The smallest increase was registered in the German market, in which the production grew by 12% compared to the same period of 2019, while the largest variation, of 51%, was that of the Iberian Peninsula. In the Italian market, the wind energy production increased by 29% and in the French market the increase was 22%.

For the end of the week of October 26, the AleaSoft‘s analysis indicates that the total wind energy production of the week will be higher than that of the previous week in the markets of Italy and Germany, while a reduction in production is expected in the Iberian Peninsula. Little variation in production is expected in the French market compared to the previous week.

AleaSoft - Wind energy production electricity EuropeSource: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE and TERNA.

Electricity demand

The electricity demand registered increases in most European markets between Monday and Wednesday of the week of October 26 compared to the previous week. The largest increases were registered in the markets of Portugal and France, whose variations were 1.5% and 1.4% respectively. These increases were followed by that of the Belgian market, of 1.0%. In the rest of the markets where the demand increased, the variations were between 0.1% and 0.5%. The exceptions were the markets of the Netherlands and Italy, where declines of 2.8% and 0.8% were registered in each case.

According to the AleaSoft‘s demand forecasting, at the end of the last week of October the demand of France and Portugal will be higher than that registered during the week of October 19, although in the case of France, the confinement announced by the Government of Emmanuel Macron, which will start on Friday, October 30, can stop this rise. In the rest of the markets, values similar to those of the previous week are expected.

AleaSoft - Electricity demand European countriesSource: Prepared by AleaSoft using data from ENTSO-E, RTE, REN, REE, TERNA, National Grid and ELIA.

Mainland Spain, photovoltaic and solar thermal energy production and wind energy production

In Mainland Spain, the electricity demand from October 26 to 28 was very similar to that registered during the same days of the previous week. For this period, a slight increase of 0.2% was registered, equivalent to a difference of only 3 GWh. The differences in the behaviour of the electricity demand can be seen in the demand observatory of Spain. At AleaSoft it is expected that at the end of the week of October 26 the demand will conclude with values close to those of the previous week.

The average solar energy production of Mainland Spain, including the photovoltaic and solar thermal technologies, increased by 33% between Monday and Wednesday of the week of October 26 compared to the average of the week of October 19. In the year‑on‑year comparison, the production with these technologies between October 1 and 28 registered an increase of 46%. At the end of the last week of October, at AleaSoft the total solar energy production is expected to be higher compared to that of the previous week.

The average level of the wind energy production in Mainland Spain during the first three days of the week that began on Monday, October 26, decreased by 14% compared to the average of the previous week. In the year‑on‑year analysis, the production with this technology registered an increase of 59% during the first 28 days of October compared to the same period of 2019. According to the analysis carried out at AleaSoft, for the last week of October, it is expected that the wind energy production will be lower than that registered during the week of October 19.

The nuclear energy production remains with a daily average close to 146 GWh since October 6. The unit II of the Ascó nuclear power plant continues to be disconnected from the grid due to a scheduled shutdown, since Saturday, October 3. The recharge is expected to conclude on November 5.

AleaSoft - Daily balance electricity Spain demand productionSources: Prepared by AleaSoft using data from REE.

The hydroelectric reserves currently have 10 460 GWh stored, according to data from the Hydrological Bulletin of the Ministry for Ecological Transition and Demographic Challenge number 43, which represents an increase of 421 GWh compared to bulletin number 42.

European electricity markets

During the first four days of the week of October 26, the prices decreased in almost all the European electricity markets analysed at AleaSoft compared to the same period of the previous week. The exception was the MIBEL market of Spain and Portugal, where price increases were registered. On the other hand, the greatest drop in prices, of 37%, occurred in the Nord Pool market of the Nordic countries. Meanwhile, in the EPEX SPOT market of Belgium there was the lowest price decrease, of 3.8%. In the rest of the markets, the price decreases were between 6.3% of the N2EX market of Great Britain and 7.8% of the EPEX SPOT market of France.

During the first four days of the last week of October, the market with the lowest average price, of €12.39/MWh, was the Nord Pool market of the Nordic countries, followed by the German market, with an average of €33.87/MWh. On the other hand, the highest average price in this period, of €46.52/MWh, was that of the IPEX market of Italy, followed by that of the British market, of €45.56/MWh. The averages for the rest of the markets were between €36.74/MWh of the market of the Netherlands and €40.67/MWh of the Iberian market.

In the first four days of the week that began on October 26, the markets with the highest daily prices were the British and the Italian. Instead, the lowest prices were those of the Nord Pool market. The rest of the markets started the week with fairly coupled prices, but as the days passed, the differences between the prices increased.

Between October 26 and 29, the daily prices only exceeded €50/MWh on one occasion, on Wednesday, October 28, in the Italian market, when a price of €50.05/MWh was reached. On the other hand, the lowest daily prices were those of the Nord Pool market, which remained below €15/MWh. The minimum daily price, of €10.09/MWh, was also reached on Wednesday, October 28.

Regarding the hourly prices, in the first four days of the last week of October, negative hourly prices were not reached in the analysed electricity markets. On the other hand, the highest hourly price, of €88.05/MWh, was reached at the hour 19 of Monday, October 26, in the British market.

AleaSoft - European electricity market pricesSource: Prepared by AleaSoft using data from OMIE, EPEX SPOT, N2EX, IPEX and Nord Pool.

The increase in wind energy production in markets such as those of Germany, France and Italy favoured the price falls of the first days of the week of October 26.

The AleaSoft‘s prices forecasting indicates that at the end of the last week of October, the behaviour of the prices will be similar to that registered during the first four days. On the other hand, for the week of November 2, it is expected that the decrease in wind energy production in most markets will favour increases in prices.
 
AleaSoft - Wind farm
 

Iberian market

In the MIBEL market of Spain and Portugal, the average price of the first four days of the week of October 26 increased compared to that of the same period of the previous week. The increase was 6.0% in Spain and 6.5% in Portugal. This behaviour was opposite to that of the rest of the European markets analysed at AleaSoft, where the prices fell in this period.

Due to these increases, the average price from October 26 to 29 was €40.67/MWh in both the Portuguese and Spanish markets. This was the third highest price in the European markets after the averages registered by the Italian market and the British market.

Regarding the daily prices of these four days in the MIBEL market, they were the same for both Spain and Portugal. From Monday to Thursday, the prices progressively increased. Thus, the minimum price, of €34.43/MWh, was reached on Monday, October 26, while on October 29, the maximum daily price, of €44.94/MWh, was registered.

During the first days of the last week of October, the decrease in wind energy production in the Iberian Peninsula favoured the increase in prices in the MIBEL market.

For the rest of the week, the daily prices are expected to fall again and the AleaSoft‘s prices forecasting indicates that the MIBEL market prices will continue to fall during the week of November 2, favoured by the recovery in wind energy production.

Electricity futures

In the first three days of the week of October 26, the electricity futures prices registered generalised falls in all the markets analysed at AleaSoft for the product of the next quarter. The ICE market and the NASDAQ market of the Nordic countries registered the largest price variations, with decreases of 14% and 15% respectively. The ICE market of Great Britain was the one with the smallest decline, with a 4.5% drop in prices of the session of October 28 compared to those of Friday, October 23. In the rest of the markets, the price drops were between 4.8% and 8.5%.

In the case of the product of the next year, the behaviour was similar, with price declines in all markets. Also for this product, the markets of the Nordic region were those with the greatest decline, which in this case was around 12%. However, in the yearly product, the EEX market of Spain was the one that registered the smallest decrease, of 3.1%. It was closely followed by the OMIP market of Spain and Portugal, which registered a decrease of 3.2% for both countries.

AleaSoft - Table settlement price European electricity futures markets Q1 and Y1

Brent, fuels and CO2

The Brent oil futures for the month of December 2020 in the ICE market, the first three days of the last week of October, had settlement prices lower than those of the same days of the previous week. After a 5.0% decrease, on Wednesday, October 28, the minimum settlement price, of $39.12/bbl, was reached. This price was 6.3% lower than that of the previous Wednesday and the lowest since the end of May. Continuing with this trend, in the session of Thursday, October 29, the prices traded below $38/bbl.

The price drop of Wednesday was influenced by news about the increase in US crude reserves and the announcement of new measures to fight the COVID‑19 pandemic in countries such as Germany and France. The confinement measures that the European governments are taking to try to control the pandemic could last until the spring, which would have significant effects on the demand. On the other hand, the production in Libya continues to recover, also favouring the decline in prices. However, during the week of October 26, the US crude reserves could decline due to the effects of the Hurricane Zeta on the production in this country.

On the other hand, the TTF gas futures prices in the ICE market for the month of November 2020, the first days of the fifth week of October, were below €15/MWh again. In this period, the prices fell to reach a settlement price of €14.48/MWh on Wednesday, October 28. This price was 2.6% lower than that of the same day of the previous week.

Regarding the TTF gas in the spot market, on Monday, October 26, an index price of €15.46/MWh was reached, the highest since the beginning of December 2019. But, subsequently, the prices began a downward trend and the index price of Thursday, October 29, was €14.44/MWh.

In the first days of the fifth week of October, the gas prices were affected by the announcement of new measures to control the spread of the coronavirus in Europe, which would reduce the demand. In addition, the recovery in supply levels from Norway on Wednesday also contributed to the decline in prices.

As for the API 2 coal futures prices in the ICE market for the month of November 2020, the first days of the week that began on October 26, also registered a downward trend. As a consequence, the settlement price of Wednesday, October 28, was $54.55/t, 2.6% lower than that of the previous Wednesday and the lowest since the fourth week of September.

Regarding the CO2 emission rights futures in the EEX market for the reference contract of December 2020, from October 26 to 28, their prices were lower than those of the same days of the previous week. On Wednesday, October 28, the minimum settlement price, of €23.03/t, was reached. This price was 2.2% lower than that of the previous Wednesday and the lowest since the beginning of the second half of June. This behaviour is related to the announcement of new measures to contain the advance of the COVID‑19 pandemic in Europe, due to the foreseeable impact on the demand that these restrictions will have.

AleaSoft - Prices gas coal Brent oil CO2Source: Prepared by AleaSoft using data from ICE and EEX.

AleaSoft analysis of the evolution of the energy markets in the second wave of the pandemic

On October 29, the second part of the AleaSoft’s webinar “Energy markets in the recovery from the economic crisis” was held with great success of participation. One of the topics discussed was the evolution of the markets in recent weeks, as well as the prospects in the face of the uncertainty generated by the advance of the second wave of the COVID‑19 pandemic in Europe and the measures that the governments already began to implement to try to stop it. The rest of the topics discussed were the financing of the renewable energy projects and the importance of the forecasting in the portfolio valuation and audits. The speakers, who on this occasion were Oriol Saltó i Bauzà, Manager of Data Analysis and Modelling at AleaSoft, Pablo Castillo Lekuona, Senior Manager of Global IFRS & Offerings Services and Carlos Milans del Bosch, Partner of Financial Advisory, the last two from the consulting firm Deloitte, agreed on the need to have robust long‑term markets prices forecasting. The professionals of the sector can request the recording of the webinar through the company’s website or by writing to webinar@aleasoft.com. At AleaSoft the informative work carried out since the pandemic began will continue and the next webinar “Prospects for the energy markets in Europe from 2021 (I)” was already announced for November 26. On this occasion, the evolution of the energy markets and the financing of the renewable energy projects will continue to be analysed, focusing on the prospects from 2021.

At AleaSoft, European electricity markets prices forecasts are carried out in all time horizons, which take into account the data published on the evolution of the economy, the effects of the measures adopted by the governments to stop the increase in those infected by coronavirus and the economic prospects for the recovery from the crisis.

To monitor how the energy markets are being affected by the confinements, the business closures, and other actions to defuse the advance of the pandemic, the energy markets observatories can be used. This tool includes updated data on the main variables of the electricity, fuels and CO2 emission rights markets, which are shown in comparative graphs with the information of the last weeks.

Source: AleaSoft Energy Forecasting.

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