All wholesale power and gas contracts fell further in March as comfortable gas supplies continued and above seasonal normal temperatures eased gas and power demand.
Day-ahead power declined 10.4% in March to average £45.0/MWh, with the contract ending the month at an 18-month low of £42.0/MWh. Prices followed the gas market lower, with periods of high wind generation amid storm Freya and storm Gareth also pressuring prices. All seasonal power prices dropped in February, falling 4.4% on average. Summer 19 power slid 8.1% to average £45.7/MWh and declined as low as £42.8/MWh on 29 March, a one-year low.
Day-ahead gas fell 16.5% to average 39.6p/th in March, dropping to a 20-month low of 35.3p/th on 29 March as forecasts of mild temperatures dampened expected demand. Prices were also pressured by a well-supplied gas system following the arrival of 14 LNG tankers, and comfortable gas supplies from UKCS and Norway. All seasonal gas contracts decreased in March, dropping 7.8% on average, despite a 4.0% increase in Brent crude oil prices. Summer 19 gas declined 13.2% to average 39.9p/th, and the contract went down to 36.4p/th on 26 March, the lowest price since June 2016.
Brent crude oil continues to recover amid tightening supplies
Brent crude oil prices continued to recover in March, rising 4.1% to average $66.9/bl. OPEC’s production cuts have provided support to prices, while sanctions on Venezuela and Iran have also acted to reduce global oil supplies. Prices rose despite rising US crude production levels, concerns that the ongoing US-China trade war would dampen global economic growth and reduce demand, and calls from US President Donald Trump for OPEC to raise output to stop prices rising. Brent crude oil climbed above $68.0/bl towards the end of March.
EU ETS carbon reversed the previous month’s decline, rising 4.5% to average €22.0/t. Prices rose above €23.0/t on 8 March; however, traders suggested the recovery was unsustainable as temperatures remained above seasonal normal levels across Europe and low gas prices were pushing coal-fired power plant out of the generation mix.
API 2 coal prices dropped for a third consecutive month, down 3.7% to average $75.7/t in March. Coal prices have fallen amid weak demand in the Northern Hemisphere, as both Europe and Asia faced temperatures well above seasonal normal levels.
The month-ahead: prices to fall further as warm weather forecast
Current forecasts are predicting a continuation of recent warm weather into April, driving demand lower and keeping gas prices at multi-year lows amid an oversupplied gas system. Several LNG tankers are expected to arrive early in the month, providing further pressure to gas prices, which will feed through into power prices as CCGT pushes coal-fired generation further out of the supply mix. However, oil prices could provide some upside as ongoing OPEC+ production cuts support Brent crude oil over the coming months.