EMISSIONS: UK Sep Power Fall On NBP Losses
UK Sep power fell on the day amid pullback in NBP as the market weighs steady storage injections before the main seasonal Norwegian maintenance period while progress on negotiating a Ukraine peace appears to have stalled recently, along with downward revisions to power demand forecasts.
- UK Baseload Month 1 Sep 25 down 1.53% at 77.1 GBP/MWh
- UK Spk Base Month 1 Sep 25 up 12.47% at -7.93 GBP/MWh
- UKA DEC 25 up 0.42% at 52.4 EUR/t CO2e
- NBP Gas SEP 25 down 1.65% at 81.76 GBP/MWh
- NBP front-month costs are tracking price movements of the TTF equivalent. TTF front month is holding within the €32.86/MWh to €33.9/MWh range since Aug. 22 as the market weighs steady storage injections before the main seasonal Norwegian maintenance period while progress on negotiating a Ukraine peace appears to have stalled recently.
- UKAs Dec25 are rising, supported by gains in EUAs and equities, with FTSE100 trending higher as utilities and energy sectors leading the gains.
- UK LNG imports have been nominated at 5 mcm/d compared to the five-day flow average of 5.08 mcm/d, while gas demand -including power – is forecast at 102 mcm/d, below the five-year average of 157 mcm/d, according to National Grid.
- Mean temperatures forecast month-ahead in London has been remained stable and at a similar level with average.
- Closer in, average temperatures in London are forecast to fall from 17.58C on Wed to 16.20C on Wed.
- Power demand forecast in the UK has been revised down between 28-31 Aug, with forecasts projecting a low of 24.21GW on 31 Aug, according to Bloomberg.
- UK wind output has been revised down between 3-5 Sep, with forecasts projecting low of 6.71GW on 2 Sep, according to Bloomberg.
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GILTS: /STIR: Goldman Hold Long SONIA Vs Euribor, Eye On QT & Reduced Gilt Risk
Goldman Sachs note that “despite the previous week’s inflationary speed bump, the UK curve outperformed last week, as soggy activity data insulated gilts from bearish price action in other markets. This muted spillover points to the continuing calming in UK-specific risk premium that had been a feature of UK macro assets in recent years. As inflation risk subsides, the half-life of bouts of gilt volatility seems to be shrinking”.
- They go on to suggest that gilts should “get additional support as the BoE slows the pace of QT from October onwards. Although the pace of active sales picks up in our forecasts, we expect the BoE to skew away from long-end sales. As a result, we maintain our constructive GBP vs EUR rates and continue to recommend long SFIZ6 vs. ERZ6”.
EQUITIES: Estoxx outright Put Buyer
SX5E (15th Aug) 4900p, bought for 4.70 in ~8.4k.
US TSY OPTIONS: Weekly TY Option
TY Weekly Option, Friday NFP Expiry:
- TY 111p, bought for '22 in ~5.11k.
