Smarter Business Weekly Energy Industry Market Review - Desk with graphs

Energy Market Review, Monday 16th July

Headlines for Monday, 16th July

  • Day-ahead gas prices declined 1.1% to 57.1p/th. Prices have fallen as the system was oversupplied for most of last week.
  • Day-ahead power was supported by a fall in renewables, rising 1.1% to £57.5/MWh. The contract hit a fresh three-month high of £58.8/MWh on 11 July with more expensive gas-fired power plant being utilised to meet demand amid low wind output.
  • Nearly all seasonal gas and power contracts decreased last week. Seasonal gas contracts fell 1.8% on average. Seasonal power contracts went down 0.4% on average.
  • Oil prices reversed recent highs, declining 4.7% week-on-week to $73.5/bl. Prices have continued to respond with volatility to the ongoing trade dispute between the US and China amid concerns of potential retaliation by China on US crude shipments.
  • The return of Libya’s oil ports after the end of the Force Majeure helped ease concerns over supply as Syncrude Canada’s oil production facility remains offline. Last week saw the release of two monthly oil market reports by OPEC and IEA. OPEC’s report forecasts lower demand for the group’s oil in 2019, which could see oil stocks rise and ease the current tightness in the market which was highlighted in IEA’s report.
  • EU ETS carbon prices averaged €16.1/t last week, 4.5% above the previous week’s average.
  • API 2 coal climbed 1.1% last week to average $92.1/t, hitting a fresh five-year high on 10 July at $93.1/t.

Brent Crude Oil

Brent crude oil curtailed 1.9% to average $76.4/bl, down from $77.9/bl the previous week.
Oil prices rose at the start of last week as workers at an oilfield in Norway went on strike, adding to recent supply disruptions in Libya and Canada, peaking at $79.09/bl within-day on 9 July. By mid-week prices had reversed recent gains following announcements from the US government of potential waivers on Iranian sanctions, and news of Chinese retaliation on US crude sales in the ongoing US-China trade war. Oil prices experienced their biggest within-day decline in the last two years, dropping to $73.23/bl on 11 July. This came after Libya’s National Oil Corp lifted the Force Majeure, ending the standoff that halted 850,000 bl/d of production output.

API 2 Coal

API 2 coal grew 1.1% to average $92.1/t last week. Coal surged with bullish momentum, hitting a fresh five-year high on 10 July at $93.1/t, supported by strong Asian demand and a tight supply market.

EU ETS Carbon

EU ETS carbon prices increased 4.5% to average €16.1/t last week, up from €15.4/t the previous week. Following a cancelled EUA carbon auction on 11 July, within-day prices hit a fresh one-month high at €16.5/t. The auction was cancelled after failing to attract sufficient interest for the 5.7mn allowances available, these will now be split between four upcoming auctions.

NBP Gas

Near-term

All near-term gas contracts lowered last week.
Day-ahead gas lost 1.1% to 57.1p/th. Day-ahead gas rose early last week despite the system being oversupplied, before falling on 12 July amid lower demand and high domestic output left the gas system oversupplied. With temperatures falling throughout last week there was less gas demand for cooling, but this is expected to increase from 16 July as temperatures rise and another heatwave is forecast.
Month-ahead gas prices fell 2.2% to 56.9p/th, down 1.2% from the same period last month when it was at 56.2p/th.

Seasonal

All seasonal gas contracts descended last week, sliding 1.8% on average, following oil prices lower.
Winter 18 was down 3.1% to 63.0p/th. Winter 18 gas hit an all-time high on 10 July as within-day prices broke 66p/th, supported by the earlier ‘Beast from the East’ in March, which has led to a greater risk premium being factored into pricing for this coming winter.

Annual October 18

Annual October 18 went down 2.7% to 56.9p/th, reversing the previous week’s gains.
The contract is 2.0% above its price the same time last month (55.8p/th) and 33.7% higher than the same time last year (42.6p/th).

Baseload Power

Near-term

Most near-term baseload power contracts fell last week.
Day-ahead power was an exception, increasing 1.1% week-on-week to £57.5/MWh on 13 July, up from £56.9/MWh the previous week. Day-ahead power, supported by lower renewables generation, rose to a one-week high on Tuesday, following its gas counterpart up, peaking at £58.45/MWh.
Month-ahead power declined 1.5% to £55.4/MWh, and September 18 power lost 1.2% to £57.8/MWh.

Seasonal

The majority of seasonal baseload power prices declined last week, down 0.4% on average.
Winter 18 lost 1.8% to £61.0/MWh. Summer and winter 19 slipped 1.1% and 0.8% to £50.6/MWh and £56.6/MWh respectively.

Annual October 18

The annual October 18 power contract subsided 1.5% to £55.8/MWh (down from £56.8/MWh).
This is £1.2/MWh (2.2%) higher than the same period last month, and an increase of 33.9% from last year when it was £41.6/MWh.