Gains in commodity markets created a general bullish trend in the GB energy market in June, with most gas and power contracts experiencing gains. In addition, the UK’s vote to leave the EU impacted commodity and power markets towards the month’s end.
Seasonal gas prices gained 0.2% on average, as higher oil prices fed through to the GB gas market. Winter 16 gas increased12.2% to average 40.6p/th, while summer 17 gas was up 12.0% to 37.5p/th.
An outage at Rough gas storage facility has prevented injections until 3 August, which could impact winter supplies. Day-ahead gas moved 13.2% higher to average 34.3p/th.
Following the EU referendum vote, spot gas contracts gained due to increased trading and a weaker pound, making UK gas less expensive to investors, and leading to a rise in demand.
Seasonal power contracts climbed in June, following their gas counterparts higher. Winter 16 power lifted 9.2% to a seven-month high of £43.8/MWh. Summer 17 power rose 9.1% to £37.7/MWh. Day-ahead power also followed its gas counterpart, up 8.8% to £37.3/MWh, the highest average in seven months.
Oil prices reach a nine-month high
Brent crude oil prices rose 4.9% to average $49.9/bl in June.
At the start of the month, prices rose leading up to the OPEC meeting.
Militant attacks in Nigeria caused supply disruptions, with demand pressured further by stronger Chinese demand. Towards the end of June, prices were impacted by market uncertainty leading up to the EU referendum. The Brexit vote caused prices to drop $2.1/bl to $48.6/bl.
API 2 coal was up 14.9% to average $53.9/t. On 20 June prices reached $58.9/t, their highest level since July 2015.
EU ETS carbon dropped 5.4% to average €5.6/t. Prices fell after the referendum result.
The month ahead: Brexit uncertainty
The markets are expected to remain volatile until more is known about the UK’s political landscape, which could take several months to stabilise.
Without an agreed output cap, some nations could increase production levels and thereby limit further gains in oil prices.
