Energy Market Review, Monday 25th June
Headlines for Monday, 25th June
- Near-term gas and power prices fell for the second week, continuing to be driven by forecasts of high wind generation, an oversupplied gas system, and a decline in Brent crude oil and EU ETS carbon prices.
- Day-ahead gas prices dropped 4.6% to 53.2p/th as an ongoing outage at the IUK and lower demand left the gas system oversupplied all week. All seasonal gas contracts declined last week, falling 0.3% on average. Winter 18 gas saw the largest change, down 1.1% to 62.4p/th amid increased supply security as gas storage injections pushed UK storage capacity to 40% full.
- Day-ahead power fell 0.5% to £53.5/MWh, following its gas counterpart, with high levels of renewables output further depressing spot prices towards the end of the week. Month-ahead power (July 18) also fell, down 1.9% week-on-week to £52.9/MWh. The majority of seasonal power contracts went down last week, with summer 19 and winter 19 power being exceptions, both rising 0.1% to £48.7/MWh and 54.5/MWh respectively.
- Oil prices fluctuated throughout last week in the run up to OPEC’s meeting in Vienna on 22 June to discuss current production cuts. The outcome of the meeting was an agreement to raise production by 1mn bpd. Brent crude prices fell 1.7% week-on-week to $74.0/bl.
- EU ETS carbon prices averaged €14.7/t last week, 3.7% below the previous week’s average. EUA prices hit a one-month low in the middle of the week at €14.5/t.
Brent Crude Oil
Brent crude oil fell 2.1% to average $74.4/bl, down from $76.0/bl the previous week.
Oil prices started the week down as China threatened 25% duty tariffs on American crude imports. Prices fell towards the end of the week on speculations that OPEC would increase production levels following their meeting in Vienna on Friday. The outcome of the meeting saw OPEC’s president announce a 1mn bpd increase from 1 July. The agreement will see Saudi Arabia, Russia, UEA, Kuwait and Oman increase their current output.
API 2 Coal
API 2 coal prices have fallen from recent highs, lowering 2.0% on average to $87.5/t, down from $89.3/t the previous week. Coal has fallen despite announcements from the Indian government calling for power companies to import more coal due to the current shortage in the country amid low hydro power generation and increasing temperatures.
EU ETS Carbon
EU ETS carbon prices decreased 3.7% to average €14.7/t last week, down from €15.2/t the previous week. EUA prices are currently 197.3% higher than the same time last year when they were €4.9/t. Average EUA prices fell last week to below their 50-day average. However, prices experienced some support in the middle of the week amid strong auction results.
All near-term gas contracts decreased last week.
Day-ahead gas fell 4.6% to 53.2p/th last week. The gas system continued to remain oversupplied throughout last week, due to lower demand and the planned IUK outage until 28 June.
Month-ahead gas prices lowered 3.5% to 53.5p/th, down 5.2% from the same period last month when it was at 56.4p/th.
All gas contracts experienced bearish movement last week, falling 0.3% on average, following oil prices down.
Winter 18 was down 1.1% to 62.4p/th and winter 19 lost 0.1% to 56.0p/th. Winter 18 gas rose on 19 June amid announcements of revised nuclear outages in Belgium for the rest of the year, which could see European gas demand increase. However, prices were weighed on by gas storage injections reducing supply concerns.
Annual October 18
Annual October 18 subsided 0.7% to 55.4p/th.
The contract is 2.2% below its price the same time last month (56.6p/th) but 31.2% higher than the same time last year (42.2p/th).
All near-term baseload power contracts fell last week. Day-ahead power dropped 0.5% to £53.5/MWh, down from £53.8/MWh the previous week.
Day-ahead power was influenced by rising renewables generation, which saw wind output rising to 18% of the generation mix across the week, and solar generation peaking at 8.2GW on Thursday.
Nearly all seasonal baseload power prices decreased last week, falling on average by 0.5%.
Winter 18 lost 0.7% to £60.0/MWh. Prices rose at the start of last week but later lowered as gas storage injection increased amid the IUK outage, providing a securer supply outlook for this winter.
Annual October 18
The annual October 18 power contract continued to decline, dropping 0.3% to £54.3/MWh (down from £54.5/MWh).
This is £1.4/MWh (2.5%) lower than the same period last month, and an increase of 32.3% from last year when it was £41.1/MWh.