Smarter Business Weekly Energy Industry Market Review - Desk with graphs

Energy Market Review, Monday 2nd July

Headlines for Monday, 2nd July

  • The majority of gas and power contracts rose last week, following commodities upwards as the oil market tightened amid multiple supply disruptions. Day-ahead gas prices boosted 0.4% to 53.4p/th as gas for power demand increased due to a fall in wind output.
  • Day-ahead power prices continued to fall, down 2.5% to £52.2/MWh. Although wind output plummeted last week, down to 5% of the generation mix from 18% the previous week, solar PV has set new records, generating 533GWh between 21-27 June. Seasonal power contracts went up 2.3% on average.
  • All seasonal gas and power contracts increased last week. Seasonal gas contracts leapt 3.6% on average, with winter 18 gas experiencing the least change, up 2.3% to 63.9p/th.
  • Oil prices rose throughout last week. Supply disruptions have occurred at Canada’s Syncrude production facility, taking 350,000 bpd offline, with expectations for the closure to remain throughout July. The upcoming sanctions placed on Iran by the US, coupled with the US-China trade war, is creating uncertainty for demand, with major economies unsure of future economic growth amid worries of high tariffs on exports.
  • API 2 coal has continued to fall from recent highs, dropping 1.0% to $86.7/t. The ongoing US-China trade dispute is creating uncertainty for US coal-miners, delaying supply contracts after the commodity was added to the list of over 650 items facing increased tariffs from China.

Brent Crude Oil

Brent crude oil grew 2.2% to average $76.1/bl, up from $74.4/bl the previous week. Oil prices started the week at $74.8/bl amid uncertainty of where OPEC’s additional production would come from after the announcement to increase output on 22 June. Reduced Canadian output, uncertainty over Libyan exports and a fall in US crude stocks lifted prices. Oil hit $78.8/bl at the end of the week, with analysts predicting prices over $80.0/bl in the near-term.

API 2 Coal

API 2 coal prices have continued to slip from recent highs, lowering 1.0% on average to $86.7/t, down from $87.5/t the previous week. The ongoing US-China trade dispute is creating uncertainty for US coal-miners, delaying supply contracts after the commodity was added to the list of over 650 items facing increased tariffs from China. This comes just a month after Chinese officials had been encouraging businesses to buy more US coal to reduce the trade gap, with coal arrivals into China at 26.4mn tonnes, up 22% from June 2017.

EU ETS Carbon

EU ETS carbon prices increased 3.0% to average €15.1/t last week, up from €14.7/t the previous week. EUA prices are currently 207.4% higher than the same time last year when they were €4.9/t. A British auction on 27 June concluded with strong auction results, selling 5.7mn EUAs at €15.0/t on average.

NBP Gas

Near-term

Most near-term gas contracts increased last week. Day-ahead gas gained 0.4% to 53.4p/th. The gas system started the week oversupplied but saw increased demand for power generation as temperatures remained well above seasonal normal levels and wind output was low. Lower flows from Norway in the middle of the week also helped support prices.
Month-ahead gas prices lowered 0.5% to 53.2p/th, down 5.4% from the same period last month when it was at 56.2p/th.

Seasonal

All seasonal gas contracts experienced bullish movement last week, up 3.6% on average, following oil prices higher.
Winter 18 was up 2.3% to 63.9p/th and summer 19 ascended 4.2% to 50.4p/th. Despite the recent uptake in injection into gas storage, volumes remain lower than the same period last year, and combined with LNG prices remaining high, winter gas prices have been supported.

Annual October 18

Annual October 18 reversed recent losses, lifting 3.2% to 57.1p/th. The contract is 2.9% above its price the same time last month (55.5p/th) and 34.6% higher than the same time last year (42.4p/th).

Baseload Power

Near-term

Most near-term baseload power contracts rose last week. Day-ahead power was the exception, dropping 2.5% to £52.2/MWh, down from £53.5/MWh the previous week. Day-ahead power has dropped amid high levels of solar output.
Month-ahead power lifted 0.4% to £53.1/MWh, as the hot and dry weather is forecast to last into July, reducing wind output.

Seasonal

All seasonal baseload power prices increased last week, rising on average by 2.3%.
Winter 18 gained 1.7% to £61.1/MWh, following its gas counterpart up. Summer and winter 19 both gained 2.5% to £49.9/MWh and £55.9/MWh respectively.

Annual October 18

The annual October 18 power contract reversed recent loses, gaining 2.1% to £55.5/MWh (up from £54.3/MWh).
This is £0.6/MWh (1.1%) higher than the same period last month, and an increase of 33.8% from last year when it was £41.5/MWh.