During May, prices continued to fall in the gas and power markets, with all gas contracts experiencing losses and nearly all power contracts following downwards. Brent crude oil, API 2 coal and EU ETS carbon prices also reduced.
In May, day-ahead gas extended losses, down 1.9% to 39.2p/th, the lowest monthly average in eight months.
Seasonal gas prices decreased by an average of 2.5%, following the oil market downwards. Winter 17 gas moved 1.8% lower to 45.7p/th. Summer 18 gas dropped 2.2% to 39.4p/th.
Day-ahead baseload power lost 1.1% to average £41.1/MWh. The month-ahead contract declined 1.8% to £38.4/MWh.
Nearly all seasonal baseload power contracts moved lower and on average decreased by 1.3%. The only exception was summer 20 power which gained 0.2% to £39.3/MWh.
Oil prices drop amid disappointment over extension to OPEC-led cuts
Brent crude oil prices dropped 4.8% to average $51.5/bl in May.
On 25 May, OPEC and non-OPEC members met to decide whether to extend current output cuts beyond June 2017. Prices fluctuated in the lead up to the meeting. Near the start of the month, prices slipped below the $50.0/bl mark, reaching a five-month low of $48.8/bl on 5 May, amid concerns that OPEC-led output cuts would fail to reduce global oversupply. As the meeting approached, prices rose with increasing market confidence that OPEC and non-OPEC members would come to an effective agreement. On the morning of the meeting, prices jumped to a five-week high of $54.4/bl. However, on 26 May, prices dropped to $51.8/bl, amid disappointment that deeper and longer production cuts were not implemented.
On average, API 2 coal prices slipped 0.9% to $65.5/t during the month. Prices remain well above the levels last year when the price averaged $46.9/t. EU ETS carbon prices lowered 2.8% to average €4.7/t. Although EU ETS carbon decreased on average, prices began to rise towards the end of the month and reached a near twelve-week high of €5.2/t on 30 May.
The month-ahead: Higher temperature forecasts and the general election
The latest Met Office forecasts for the UK in June suggest temperatures around the seasonal normal. The south-east, however, is likely to experience “very warm” temperatures throughout the month. This may lead to a reduction in gas and power demand.
On 8 June, the UK’s general election will take place, which could influence investment in renewables and future energy policy.