Gains were observed across most power and gas contracts in March, with notable near-term growth as day-ahead gas reached its highest price since at least 2008.
On 1 March day-ahead gas prices reached 125.0p/th, their highest level in at least 10 years. Early month gains were driven by National Grid announcing a gas deficit warning, while demand sored to a five-year high amid below-average temperatures supplied by ‘the Beast from the East’. Outages at South Hook LNG terminal and the Kollsnes gas processing site further tightened supplies. On average day-ahead gas prices rose 17.8% to 64.1p/th. Growth was observed across all seasonal gas contracts, rising 2.4% on average. The largest gains were on the near-curve as summer 18 and winter 18 gas increased 5.8% and 4.1% to average 44.8p/th and 52.3p/th respectively.
Day-ahead power leapt 12.3% to average £57.9/MWh. On 1 March prices reached an 18-month high of £98.0/MWh. Bullish gas and carbon prices throughout the month supported power prices. On average seasonal power contracts grew 1.8% across March. The summer 18 and winter 18 contracts lifted 4.8% and 4.1% to average £45.3/MWh and £51.0/MWh.
EU ETS carbon extends gains to reach a seven-year high, while coal falls
EU ETS carbon prices extended from the previous month’s gains, increasing 19.2% to average €11.2/t in March (up from €9.4/t). On 28 March prices reached their highest level since June 2011 at €14.1/t. Carbon prices jumped after Minister of State for Energy and Clean Growth, Claire Perry, said the UK wished to stay in the EU ETS scheme until at least 2020. Prices received further support from strong action results, amid the compliance deadline for companies to report 2017 emissions (due date 31 March).
API 2 coal prices continued to decline in March, falling 4.9% to average $76.7/t, down from $80.7/t the previous month. This is its lowest monthly average since July 2017. Coal prices weakened amid decreased demand from the Asian/Pacific market. Chinese production has also climbed over the past two-months, up 5.7% year-on-year, easing demand for imports.
Brent crude oil prices boosted 0.4% to average $65.9/bl, up from $65.6/bl the previous month. News that OPEC and non-OPEC members achieved 138% compliance with agreed output cuts in February supported prices upwards.
The month-ahead: Another cold spell for April, Russian LNG supplies unmoved by recent tensions
April could see another cold spell in Northern Europe with the UK expected to experience colder than normal weather. Gas and power prices could also be supported with European gas storage stocks at their lowest levels since 2013.
Recent tensions between the UK and Russia are not expected to impact imports of Russian LNG or coal into the UK, in the near-term analysts suggest. This is reflected in that the UK received two LNG cargoes from Russia in March.
