The “Beast from the East” hit Europe towards the end of February, causing a surge in gas and power demand, with day-ahead gas and power prices experiencing extraordinary spikes. A series of gas supply and power plant outages only acted to exacerbate price rises.
Day-ahead gas prices across the month rose 6.5% to average 54.4p/th. On 28 February, prices reached 105.0p/th, a five-year high. Below average temperatures bolstered demand, while low LNG imports and a serious of supply outages supported prices. In contrast, seasonal gas contracts fell on average by 5.3%. The largest loss came from the summer 20 contract, which lost 6.6% to average 37.6p/th.
Average day-ahead power prices increased 1.3% to £51.5/MWh. On 28 February power prices reached a one-and-a-half year high of £83.5/MWh, due to a surge in its gas counterpart and several power plant outages. Seasonal baseload power contracts reversed the previous month’s gains and subsided 2.1% on average. Winter 19 power experienced the largest losses, declining 2.7% to average £45.9/MWh.
EU ETS carbon hits fresh six-year high, as Brent crude falls to a nine-week low
EU ETS carbon prices built on the previous months gains, growing 12.5% to average €9.4/t, (up from €8.3/t). On 28 February prices reached €10.1/t, a six-year high.
Growth stemmed from heavy buying from speculators with expectations of increased demand from emitters preparing for 2017 compliance. Towards the end of the month, more favourable spreads for coal-fired power generation, leading to greater coal-fired output, along with rising German power prices supported prices upwards.
Brent crude oil prices declined 4.5% to average $65.7/bl during the month, down from $68.8/bl the previous month. On 14 February prices fell to a nine-week low of $62.4/bl. Prices were driven down by concerns of rising US oil output, with the US rig count reaching a three-year high. Additionally, an unexpected rise in US crude stocks, coupled with a drop in global equities conspired to weigh on prices.
API 2 coal prices dropped 10.0% to average $80.7/t in February, down from $89.7/t the previous month. Coal prices declined at the start of the month due to robust production from Australia and South Africa. However, towards the end of the month prices did start to rise amid the cold snap throughout Europe.
The month-ahead:
Possible early bullish prices amid outages at SEGAL, Kollsnes and Hinkley Point B
The recent cold snap that plagued the end of the month, strengthening near-term power and gas prices, is forecast to last into early March. In addition, prolonged outages at the SEGAL pipeline and Kollsnes gas field will also continue until early March, tightening gas supplies. However, as we move into Spring gas and power demand will wane, and short-term prices should drift downwards.
