Gas market trends
What’s been happening?
- Day-ahead gas prices rose 9.4% to average 55.9p/th
- The month-ahead (June) gas contract climbed 14.0% to average 54.4p/th, peaking at 58.6p/th on 30 May
- Gas prices witnessed bullish growth in May, with seasonal contracts from winter 18 to winter 20 rising 11.5% on average
- The largest gains continued to be on the near-curve as winter 18 and summer 19 gas increased 12.0% and 13.7% to average 62.2p/th and 48.1p/th respectively
- Winter 19 gas lifted 11.4% to 56.3p/th, while summer 20 and winter 20 contracts climbed to 43.9p/th (up 10.8%) and 52.5p/th (up 9.4%)
- The annual October 18 gas contract lifted 12.7% to 55.1p/th
Key market drivers
- In early May day-ahead gas lost some of the gains made the previous month as warmer temperatures lead to reduced demand. The rumoured arrival of Qatari LNG tanker, Aamira into South Hook LNG terminal also aided bearish fundamentals
- A combination of planned, unplanned and extended outages led to tighter North Sea supplies which caused bullish prices towards the end of May. Gas prices were also supported by the oil market, which experienced significant growth
- Towards the end of May gas prices lifted further, following higher demand for gas in power generation as solar PV and wind output fell
* £ per p/therm (Annual Forward Average)
Electricity market trends
What’s been happening?
- Day-ahead power grew 6.6% through May to average £54.1/MWh
- The month-ahead (June) power contract grew 10.7% to average £53.9/MWh
- On average seasonal power contracts ascended 10.6% across May
- Winter 18 and summer 18 power lifted 10.2% and 11.0% to average £59.8/MWh and £48.9/MWh respectively
- Contracts for winter 19 and summer 20 delivery also rose, up 9.9% and 9.8% to £54.8/MWh and £45.1/MWh
- Winter 20 saw the largest growth, leaping 12.0% to £53.0/MWh
- The annual October 18 power contract increased 10.6% to average £54.3/MWh
Key market drivers
- Power contracts responded to milder temperatures leading to reduced demand in early May, with solar generation ascending in the first week of the month
- Prices were supported in May by lower wind generation
- Bullish gas markets and commodity prices have further driven up power prices to fresh highs
* £ per MWh (Annual Forward Average)
- Most tracked international gas prices decreased in the first week of May. European markets had been influenced by forecasts of easing demand, but prices were pegged back by reduced Dutch gas production across the week
- All tracked international gas prices strengthened in the second week of May, rising 3.8% on average. The largest European gains were observed on the Dutch TTF, rising 4.6% to 54.3p/th. Belgium gas prices grew 3.2% to 52.9p/th. Prices rose with forecasts of colder temperatures, while outages at the Norwegian Åsgard and Kollsnes gas fields supported prices
- European gas prices continued to strengthen in the third week of the month, rising 4.5% on average. The largest European gains were observed in Belgium, rising 7.5% to 56.9p/th. Dutch TTF prices grew 5.1% to 57.1p/th. Belgium prices were influenced by three unplanned outages on the Norwegian continental shelf throughout the week. Below average temperatures also increased demand and supported prices
- Most tracked international gas prices strengthened last week, rising 2.8% on average. The largest European gains were observed on the TTF, rising 2.7% to 58.7p/th. European gas prices were influenced by pipeline outages across the Norwegian continental shelf throughout the week, resulting in tightened supplies on the continent. Dutch demand rose amid the closure of the IUK interconnector until mid-June
- European power prices saw bullish movement in May, with Dutch power prices experiencing the greatest growth, rising 21.7% across the month
- GB prices ended the month 46.1% higher than French prices, 58.0% above German prices and 1.4% lower than Dutch prices
- Despite strong renewables output in France in early May, losses were pegged back amid a strike impacting nuclear supplies at EDF reactors
- French and German power prices were later supported by low renewable generation and by bullish movement in the commodity and gas markets throughout May
- In the final week of May, both France and Germany saw lower nuclear availability. During this time Germany had increased demand and was able to balance the grid due to increased renewable and coal-fired supply, lowering the price. French power markets saw prices rise during this time.
- Brent crude oil prices leapt 7.5% to average $77.0/bl during May.
- Prices have fluctuated in response to changing geopolitical tensions, with intraday prices reaching a high of $80.1/bl on 17 May, before settling at a fresh three-and-a-half year high of $79.8/bl on the day. Prices have continued to respond to concerns surrounding US sanctions against Iran, with rising expectations that Iranian crude exports will be impacted upon.
- API 2 coal prices rose 7.9% to average $87.3/t. Despite low European coal demand in early May, market demand stemmed from South-East Asia with 10 out of the 24 South Korean nuclear power stations offline. Coal prices also tracked the gains in oil prices throughout the month.
Carbon (EU ETS)
- EU ETS carbon prices gained 10.5% to average €14.7/t, hitting €16.1/t on 24 May, a fresh near seven-year high.
- Prices were supported by rising European carbon emissions across early May, however, weak auction trading capped gains. Carbon prices were influenced by strong auction results in the middle of the month, and the cancellation of a UK auction that caused a short-term reduction in supply. Carbon prices were supported towards the end of May by periods of high German power prices and strong EUA demand but were again weighed on by weak auction results.