Smarter Business Weekly Energy Industry Market Review - Desk with graphs

Energy Market Review, Tuesday 5th June

Headlines for Tuesday, 5th June

  • Commodity markets remained a key driver behind movements in power and gas contracts last week, with oil and carbon markets ending May with volatile behaviour on the back of heightening geopolitical tensions.
  • Oil prices fluctuated throughout last week showing no clear direction as they responded to tensions between the US and OPEC nations. OPEC suggesting that it would relax production cuts to replace a potential reduction in exports from Iran and Venezuela meant that Brent crude prices averaged 2.5% below the previous week at $76.7/bl. A report of rising US output forecasts from the EIA could result in Brent crude prices falling in June.
  • EU ETS carbon prices set a fresh near-seven-year high of €16.6/t on 29 May, the highest since June 2011. Prices fell €1.0/t within-day on 31 May due to the heavy selling of allowances by market participants following President Trump’s decision to impose steel and aluminium tariffs.
  • Day-ahead gas rose 1.6% week-on-week to 58.0p/th. The week started with falling prices despite planned outages and forecasts of rising gas demand for power generation as wind output dropped. The system was undersupplied towards the end of last week leading to prices recovering earlier losses.
  • Day-ahead power mirrored its gas counterpart upwards, rising 0.5% to £56.3/MWh week-on-week. Month-ahead power (July 18) also increased, gaining 1.4% week-on-week to £56.4/MWh.

Brent Crude Oil

Brent crude oil fell 2.5% to average $76.7/bl, down from $78.7/bl the previous week. Prices are 4.0% above the last month ($73.8/bl), and 50.6% higher than this time last year ($50.9/bl).
Oil prices were volatile last week as they responded to geopolitical tensions. Oil prices fell after OPEC suggested that it would relax current production cuts, countering the potential reduction in exports caused by US sanctions on Iran and Venezuela. A report of rising US output forecasts from the EIA could result in Brent crude prices falling in June.

API 2 Coal

API 2 coal prices slipped 1.2% on average to $87.3/t, lowering from $88.3/t the previous week.
A strengthening US dollar aided in making coal increasingly less economical to use for power generation. Therefore, demand for coal eased across the week.

EU ETS Carbon

EU ETS carbon prices dropped 0.7% to average €15.7/t last week, down from €15.8/t the previous week. Prices set a fresh near-seven-year high of €16.6/t on 29 May, the highest since June 2011.
Growing German power prices initially supported carbon prices, however prices fell €1.0/t within-day on 31 May due to the heavy selling of allowances by market participants following President Trump’s decision to impose steel and aluminium tariffs on the EU, Mexico, and Canada.

NBP Gas

Near-term

Day-ahead gas recovered the previous week’s losses, rising 1.6% to 58.0p/th last week.
The week started with falling prices despite planned outages and forecasts of rising gas demand for power generation as wind output dropped. The system was undersupplied towards the end of last week leading to prices recovering earlier losses.
Month-ahead gas prices remained relatively unchanged, slipping 0.2% to 56.2p/th.

Seasonal

All seasonal gas contracts continued to undergo bearish movement, declining 2.7% on average.
Winter 18 gas lost 0.8% to 63.6p/th and summer 19 gas dropped 3.4% to 47.4p/th.

Annual October 18

Annual October 18 gas lost 1.9% to 55.5p/th.
The contract is 8.4% above its price the same time last month (51.2p/th) and 31.1% higher than the same time last year (42.3p/th).

Baseload Power

Near-term

All near-term baseload power contracts rose last week.
Day-ahead power increased 0.5% to £56.3/MWh, up from £56.0/MWh the previous week.
Day-ahead power mirrored its gas counterpart upwards and was also supported by periods of lower wind output.

Seasonal

All seasonal baseload power prices declined last week, falling on average by 1.9%.
Winter 18 fell 0.9% to £61.0/MWh, down from £61.5/MWh the previous week.
Summer 19 dropped 2.4% to £48.8/MWh and winter 19 power lost 3.2% to £54.3/MWh.

Annual October 18

The annual October 18 power contract declined 1.6% to £54.9/MWh (down from £55.8/MWh).
This is an increase of £3.8/MWh (7.5%) from the same period last month, and an increase of 34.9% from last year when it was £40.7/MWh.