Power and gas contracts experienced mixed trends across January, while commodity prices rose to multi-year highs.
Day-ahead baseload power prices declined 8.6% to £50.9/MWh, easing away from the previous month’s bullish activity. In addition, falling demand and steady gas, coal and nuclear generation eased prices. Summer 18 power lifted 0.1% to average £44.3/MWh. On 12 January, the contact hit £45.4/MWh, its highest level since February 2015. Winter 18 power experienced the largest growth, rising 1.2% to average £50.3/MWh. Summer 19 power lifted 0.8% to average £41.1/MWh. The winter 19 contract rose 0.3% to £47.2/MWh.
Day-ahead gas prices across the month curtailed 13.6% to average 51.4p/th, owing to easing supply concerns following the end of multiple supply outages. On 29 January the contract hit a three-month low (47.8p/th). Across January seasonal contracts experienced mixed movements and resulted in contracts remaining relatively static on average. The largest loss was observed in the summer 20 gas contract, which fell 1.2% to average 40.4p/th.
EU ETS carbon hits six-year high, API 2 coal 5-year high, Brent crude three-year high
Brent crude oil prices lifted 8.0% to average $68.8/bl during January, up from $63.6/bl the previous month. On 25 January prices reached a fresh three-year high of $70.8/bl.
Growth stemmed from tightening supplies from OPEC and non-OPEC members. Prices also rose following the IMF’s improved forecast depicting stronger economic global growth across 2018 and 2019. Comments by the Russian and Saudi Arabian Energy Ministers suggesting an extension to production cuts beyond 2018 added support.
API 2 coal prices lifted 2.1% to average $90.0/t in January. On 3 January, prices rose to their highest level since March 2013 at $91.50/t. Early month highs were driven by strong Asia-Pacific demand, coupled by a weakening US dollar.
EU ETS carbon prices leapt 11.6% to average €8.3/t. On 25 January prices reached €9.4/t, a six-year high. Despite bearish conditions during the middle of the month prices continued to grow. It was suggested that the driver behind this was new speculators in the market forward buying allowances, and assuming tighter supplies in the future.
The month-ahead:
Sizewell B to return to operation, Capacity Market auction, and Centrica to withdraw remaining gas from Rough
Sizewell B nuclear plant is expected to return to operation in early February after a period of maintenance. Its return will boost power margins and could soften near-term prices. The upcoming Capacity Market auction will procure generating capacity for winter 2021. The outcome could impact on prices further along the forward curve.
Centrica was also granted approval to withdraw the remaining cushion gas from the Rough storage site, and this could act to put pressure near-term gas prices.
