Energy Market Review, Monday 18th June
Headlines for Monday, 18th June
- Gas and power contracts showed mixed movements last week. Near-term prices fell, driven by forecasts of high wind generation, an oversupplied gas system, and a decline in commodity prices.
- Day-ahead gas dropped 3.2% to 55.8p/th, caused by lower demand and a planned IUK outage which is acting to decrease gas export capacity and lifting available supplies. The majority of seasonal gas contracts rose last week, with summer 19 gas the exception, falling 0.2% to 48.4p/th.
- Day-ahead power closely followed gas prices down, falling 4.4% to £53.8/MWh. In addition, high levels of renewables output depressed spot power prices towards the end of last week, even leading to negative system prices on the Balancing Mechanism. Nearly all seasonal power contracts declined last week. Winter 18 power was the exception, rising 0.2% to £60.5/MWh.
- Oil prices have begun to stabilise after recent volatility. Week-on-week Brent crude oil prices have fallen by 2.2% to $75.3/bl, amid expectations that Saudi Arabia and Russia will ease the current supply restrictions at an OPEC meeting on 22 June.
- EU ETS carbon prices fell 2.8% to average €15.3/t last week, owing to reduced spreads for coal-fired output in Germany. In addition, a provisional agreement from EU lawmakers could see the renewable energy target increased from 27% to 32% for 2030, which could depress prices in the future.
Brent Crude Oil
Brent crude oil rose 0.2% to average $76.0/bl. However, prices ended the week down at $75.3/bl, 2.2% below the previous Friday. Oil prices began to stabilise last week after weeks of volatility amid potential US sanctions on OPEC members Venezuela and Iran. Prices have lowered ahead of this week’s OPEC meeting in Vienna on 22 June, where it is expected that Saudi Arabia and Russia may agree to increase production.
API 2 Coal
API 2 coal prices have continued to climb, rising 1.1% on average to $89.3/t, up from $88.3/t the previous week. Coal prices are continuing to be supported by high Asian coal demand as the Chinese heatwave continues to support demand for air-conditioning and recent strikes in South Africa threaten to cause disruptions to Atlantic coal supplies.
EU ETS Carbon
EU ETS carbon prices fell 2.8% to average €15.3/t last week, down from €15.8/t the previous week. EUA prices are currently 207.5% higher than the same time last year when they were €5.0/t.
Prices fell due to reduced spreads for coal-fired output in Germany, decreasing emissions. A provisional deal from EU lawmakers which could see the renewable energy target increased from 27% to 32% for 2030 could see an increase in renewable energy generation and act to reduce future demand for EUAs.
Day-ahead gas fell 3.2% to 55.8p/th last week.
The gas system was oversupplied for most of last week. This was caused by lower demand, coupled with the planned IUK outage which will act to decrease gas export capacity and lift available supplies.
Month-ahead gas prices remained unchanged at 55.4p/th, but were down 2.0% from the same period last month when it was at 56.5p/th.
Most seasonal gas contracts continued to experience bullish movement last week, rising 0.3% on average. Summer 19 gas was the exception, falling 0.2% to 48.4p/th.
Winter 18 gained 1.1% to 63.1p/th and winter 19 increased 0.2% to 56.0p/th.
Annual October 18
Annual October 18 grew 0.5% to 55.8p/th.
The contract is 2.6% below its price the same time last month (57.3p/th) and 31.9% higher than the same time last year (42.3p/th).
All near-term baseload power contracts fell last week. Day-ahead power dropped 4.4% to £53.8/MWh, down from £56.2/MWh the previous week.
Day-ahead power was influenced by rising renewables generation, which saw wind output rising to 9% of the generation mix as Storm Hector led to transmission connected wind output peaking at 9.7GW on 14 June.
Power prices could rise this week as Dungeness B-22 and Heysham 1-2 have been taken offline for planned maintenance until 22 June and 23 August respectively. Prices could be weighed on later in June by the return of capacity.
Nearly all seasonal baseload power prices decreased last week, falling on average by 0.5%. Winter 18 was the exception, rising 0.2% to £60.5/MWh. Winter 18 power is down 1.3% from the previous month when it was £61.3/MWh.
Annual October 18
The annual October 18 power contract continued to decline, dropping 0.5% to £54.5/MWh (down from £54.8/MWh). This is £1.5/MWh (2.6%) lower than the same period last month, and an increase of 33.4% from last year when it was £40.9/MWh.