Energy Market Review, Monday 14th May
Headlines for Monday, 14th May
- Last week observed bullish movements across all tracked commodities, power and gas prices, with an array of contracts reaching new highs.
- On 11 May EU ETS carbon prices reached a near seven-year high of €14.6/t. Prices increased 4.6% to average €13.9/t across the week. Carbon prices were likely driven by a lack of fresh supplies with no auctions being held on Thursday and Friday due to European holidays. The US announced its withdrawal from the 2015 international Iranian nuclear agreement, resulting in the reintroduction of economic sanctions against Iran. This announcement was followed by oil prices reaching a three-and-a-half year high of $77.6/bl on 10 May.
- Day-ahead gas prices reached a two-month high at the end of the week, reaching 55.0p/th. Outages at gas fields and terminals pegged back early losses and supported near-term prices. The announcement of US sanctions permeated throughout the gas market.
- On 9 May, day-ahead baseload power prices rose £0.95/MWh above day-ahead peak power (£51.30/MWh). This was driven by robust solar output, and while this remains a relatively rare event, it is a trend we can expect to occur more frequently in future summer seasons. Overall, day-ahead baseload power gained 5.1% to £54.3/MWh.
- API 2 coal prices gained 1.6% last week, averaging $85.8/t. Coal prices throughout the week tracked the gains observed in oil prices.
Brent Crude Oil
Brent crude oil increased 3.3% to average $76.2/bl, up from $73.8/bl the previous week.
At the start of the week oil prices fell as the US dollar rose to its highest level this year against alternative currencies. Such downward movement was short lived as the US announced its withdrawal from the 2015 international Iranian nuclear agreement, resulting in the reintroduction of economic sanctions against Iran. This announcement was followed by oil prices reaching a three-and-a-half year high ($77.6/bl) on 10 May. Prices were also driven upwards by an unexpected drop in US crude inventories.
API 2 Coal
API 2 coal prices gained 1.6% last week, averaging $85.8/t (up from $84.4/t).
Coal prices throughout the week tracked the gains observed in oil prices, while Indian demand rose as power plant inventories across the country fell to just 10 days’ supply.
EU ETS Carbon
EU ETS carbon prices grew 4.6% to average €13.9/t last week, rising from €13.3/t the previous week.
Carbon prices were likely driven by a lack of fresh supplies with no auctions being held on Thursday and Friday due to European holidays.
Day-ahead gas expanded upon the previous week, rising 6.3%, up 3.3p/th to 55.0p/th. On 11 May, prices reached a two-month high of 55.0p/th.
Prices started the week lower amid low demand and secure supplies following the restart of a number of North Sea gas fields and terminals after a period of outages. However, an unplanned outage at North Morecambe Barrow gas terminal, along with planned outages at Field and Kollsnes pegged back early losses and supported near-term prices. The announcement of the reintroduction of US sanctions against Iran lifted oil prices to fresh highs. This permeated bullish sentiment into European gas markets supporting NBP prices.
All seasonal gas contracts continued to experience bullish growth, gaining 6.6% on average.
Winter 18 gas lifted 6.4% to 61.7p/th and summer 19 gas increased 7.8% to 47.9p/th.
Annual October 18
Annual October 18 gas went up 7.0% to 54.8p/th. The contract is 12.0% above its price the same time last month (49.0p/th) and is 34.3% higher than the same time last year (40.8p/th).
Day-ahead power gained 5.1% to £54.3/MWh, up from £51.6/MWh the previous week.
Power prices started the week in a bearish mood, impacted by high solar and wind generation, coupled with low demand. Towards the end of the week a fall in wind generation and gains across gas and carbon markets reversed bearish movements and supported power prices.
All seasonal baseload power prices climbed last week, increasing on average by 5.8%.
Winter 18 power continued to grow, reaching a fresh three-year price high at £59.7/MWh, an increase of 5.9% from the previous week.
Summer 19 again saw the largest growth across last week, rising 6.9% to £48.9/MWh. This is up from £44.3/MWh last month (an increase of 10.5%).
Annual October 18
The annual October 18 power contract increased 6.3% to £54.3/MWh (up from £51.0/MWh).
This is an increase of £4.7/MWh (9.5%) from the same period last month, and an increase of 37.9% from last year when it was £39.4/MWh.