Energy Market Review, Monday 13th August
Headlines for Monday, 13th August
- The majority of wholesale gas and power contracts showed notable gains last week, with all seasonal contracts hitting fresh highs as bullish market fundamentals, including higher carbon and coal prices, continued to give support.
- Day-ahead gas prices gained 0.6% to 59.0p/th. Prices have continued to be lifted by higher EU ETS carbon prices, which have acted to make gas-fired power generation more favourable relative to coal and increased gas demand. Seasonal gas contracts gained 3.7% on average, whilst seasonal power contracts went up 2.7% on average.
- Day-ahead power showed mixed movements across the week, responding to volatile wind conditions, finishing the week up 0.5% at £60.0/MWh.
- Brent crude oil fell 0.5% to average $73.4/bl, down from $73.8/bl the previous week. Despite ongoing geopolitical tensions generally supporting prices, concerns of oil market oversupply and slower than expected demand growth acted to weigh on prices.
- EU ETS carbon prices increased 1.5% to average €17.6/t last week, up from €17.3/t the previous week. Prices have been supported by increased demand for allowances amid higher fossil fuel power generation across Europe.
- API 2 coal rose 1.4% to average $87.3/t last week. According to data released on 8 August, Chinese coal imports in July increased 14% month-on-month, to a four-and-a-half-year high.
Brent Crude Oil
Brent crude oil fell 0.5% to average $73.4/bl, down from $73.8/bl the previous week.
The reinstatement of US sanctions on Iran supported prices early in the week before dropping following an alert from North Sea oil markets of oversupply, which has led to nearly seven million barrels of North Sea crude to be held on ships due to a lack of buyers. Towards the end of the week, Brent crude oil prices fell below $72.0/bl with concerns of slower than expected demand growth.
API 2 Coal
API 2 coal rose 1.4% to average $87.3/t last week. According to data released on 8 August, Chinese coal imports increased 14% in July to 175mn tonnes, a four-and-a-half-year high. Demand continues to be driven by high temperatures leading to increased air conditioning demand.
EU ETS Carbon
EU ETS carbon prices increased 1.5% to average €17.6/t last week, up from €17.3/t the previous week.
Prices have been supported by increased buying amid higher fossil fuel power generation in Europe. The upcoming implementation of the Market Stability Reserve in 2019 will also take surplus allowances out of the market, and this has also been lifting current prices.
Day-ahead gas gained 0.6% to 59.0p/th from the previous week. Gas prices started the week at 59.0p/th as another 24-hour strike began on Monday morning at Total’s North Sea gas platforms; Alwyn, Elgin and Dunbar. Prices continued to be driven up by volatile coal and oil prices and gained further support from cooler weather towards the end of last week.
September 18 gas rose 3.0% week-on-week to 60.1p/th. and hit a fresh high of 60.9p/th on 8 August. October 18 gas also increased 3.0%, rising to 60.3p/th, up 3.0% from the same period last month when it was at 58.6p/th.
All seasonal gas contracts rose week-on-week, up 3.7% on average. Seasonal gas contracts hit fresh highs on 8 August, with winter 18 gas peaking at 66.2p/th and summer 19 at 53.9p/th.
Winter 18 and summer 19 both rose 3.1% to 65.6p/th and 53.2p/th respectively.
Annual October 18
Annual October 18 rose 3.1% week-on-week to 59.4p/th. The contract hit a fresh high of 65.0p/th on 8 August.
The contract is 4.4% above its price the same time last month (56.9p/th) and 32.0% higher than the same time last year (45.0p/th).
All near-term baseload power contracts experienced bullish movements last week.
Day-ahead power rose 0.5% week-on-week to £60.0/MWh on 10 August, up from £59.7/MWh the previous week. Prices fell on 7 August following the forecast of higher renewables output for the rest of the week as temperatures dipped briefly below seasonal normal levels.
The month-ahead power contract is currently at its highest since December 2017, September 18 power gained 1.6% to £59.9/MWh, and peaked at £60.3/MWh on 8 August. October 18 power gained 2.4% to £60.4/MWh.
Week-on-week, seasonal contracts were up 2.7% on average, with all seasonal baseload power contracts hitting fresh highs last week. Winter 18 increased 2.3% to £63.3/MWh, hitting an all-time high of £63.7/MWh on 8 August.
Annual October 18
The annual October 18 power contract gained 2.4% to £58.2/MWh (up from £56.9/MWh). This is £2.5MWh (4.4%) higher than the same period last month, and an increase of 33.5% from last year when it was £43.6/MWh.
The annual October 18 power contract also hit a fresh high last week, peaking at £58.4/MWh on 8 August.