Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Commodities hit multi-year highs, power follows

A number of gas and power contracts hit multi-month highs in September, whilst Brent crude oil, API 2 coal and EU ETS carbon prices all reached multi-year highs.

Day-ahead gas gained 8.1% to average 46.2p/th in September, its highest monthly average in seven months, as annual maintenance at a number of gas import terminals and processing facilities restricted supplies. On 14 September, the contract reached a seven-month high of 48.0p/th. Seasonal gas contracts gained 1.6% on average, supported by higher oil prices. Winter 17 gas jumped 4.8% to 49.9p/th, with gains exacerbated by concerns over tight supplies for this winter. Summer 18 gas moved 2.5% higher to 41.8p/th.

Day-ahead baseload power leapt 8.8% to average £47.2/MWh, also its highest monthly average in seven months, following gas prices upwards. The month-ahead contract rose 3.2% to £46.5/MWh. Most seasonal baseload power contracts rose, and on average increased by 1.5%. Winter 17 power climbed 4.3% to £50.6/MWh, and summer 18 power gained 2.1% to £42.2/MWh.

Coal hits three-year high, oil two-year and EU ETS carbon one-year

Brent crude oil prices climbed 6.6% to average $55.3/bl in September. On 28 September, Brent crude oil reached $58.5/bl, its highest price since July 2015.

Prices started the month just above $52.3/bl and climbed steadily throughout the month. Prices were supported by the ongoing restart of US crude oil refineries following forced shutdowns caused by Hurricane Harvey, forecasts of strong European and US crude demand, and news that Saudi Arabia will cut allocations to its customers by 350,000bl/d in October.

On average, API 2 coal prices gained 6.3% to $81.5/t during the month. On 20 September, prices reached $84.0/t, its highest level since January 2014. Coal prices were supported by continued high demand from Asia, stronger demand from Europe amid low levels of hydro and gas stocks, and supply disruptions caused by miner strikes in South Africa and China.

EU ETS carbon prices jumped 19.7% to average €6.8/t. On 14 September EU ETS carbon reached €7.6/t, its highest price since January 2016, following a breakthrough in talks intended to overhaul the carbon market post-2020.

The month-ahead: Comfortable power supply margins forecast for October, Centrica to withdraw gas from Rough

According to National Grid, power supply margins in October are expected to be more comfortable than in September with a greater amount of generation capacity available. This is in part due to the commissioning of capacity procured in the Capacity Market auction.

Centrica is expected to begin withdrawing gas from its Rough gas storage site following the completion of maintenance on 1 October. Despite the site’s recent permanent closure, Centrica has permission to withdraw 870mcm of cushion gas and 99mcm of working gas at a maximum rate of approximately 12mcm/d.