A number of gas and power contracts hit multi-month highs in August along with Brent crude oil, API 2 coal and EU ETS carbon prices.
In August, day-ahead gas gained 18.0% to average 42.7p/th, its highest monthly average in six months, as Norwegian supply disruptions and an unplanned outage at the Cygnus gas field limited supplies throughout the month. On 30 August, the contract reached a six-month high of 46.3p/th.
Seasonal gas prices gained 3.8% on average. Winter 17 gas jumped 5.9% to 47.6p/th, and summer 18 gas moved 4.7% higher to 40.7p/th. All other seasonal gas contracts increased.
Day-ahead baseload power lifted 1.0% to average £43.3/MWh, also its highest monthly average in six months. The month-ahead contract rose 9.3% to £47.9/MWh.
All seasonal baseload power contracts followed commodity prices higher and on average increased by 3.5%. Winter 17 power climbed 5.0% to £48.6/MWh, following concerns over French nuclear availability this winter which could push power prices in interconnected markets higher. Summer 18 power gained 4.2% to £41.4/MWh.
Coal hits three-year high, EU ETS carbon reaches seven-month high
Brent crude oil prices climbed 6.0% to average $51.9/bl in August, despite posting a month-on-month loss – prices opened the month at $52.7/bl but ended the month down at $51.0/bl. On 10 August, Brent crude oil hit a three-month high of $53.3/bl.
Prices were supported in the first half of the month by falling US crude inventories, supply disruptions in Libya after its Sharara oil field was shutdown due to a pipeline blockade and lower crude supplies from Saudi Arabia. Prices faced severe downward pressure towards the end of the month as Hurricane Harvey struck the Gulf of Mexico, forcing the closure of approximately 4.4mn bl/d (~24%) of the United States’ refining capacity, curbing US oil demand.
On average, API 2 coal prices gained 5.8% to $76.6/t during the month. On 30 August, prices reached a three-year high of $79.2/t. Coal prices were supported by continued high demand from China and other Asian countries as well as ongoing supply disruptions in Australia, caused by strike action at a number of the country’s mines.
EU ETS carbon prices jumped 7.8% to average €5.7/t, as concerns over French nuclear availability this winter led to higher demand for EU ETS allowances. On 30 August prices hit a seven-month high of €6.1/t.
The month-ahead: tighter margins forecast for September
According to National Grid, parts of September are forecast to see tighter power supply margins owing to power plant maintenance, including a 1GW reduction in interconnector availability, and rising demand levels.
There are also concerns over French nuclear plant outages and low hydro reservoir levels in Europe, both of which could push power prices in interconnected markets higher as alternative sources of generation may be required to meet demand.
