Losses in commodity markets created a bearish trend in the GB energy market in August, with nearly all gas and power contracts experiencing reductions.
Seasonal gas prices decreased by 5.3% on average, following a slip in oil prices. Winter 16 gas experienced the largest drop, at 6.1%, to average 42.0p/th. Seasonal gas prices remained below their levels last year. The first shale gas shipment is reportedly set to arrive in the UK from the US in September, which could reduce prices even further.
Centrica announced that it will make 20 wells available at Rough gas storage facility from 1 November 2016. This has improved the supply outlook for the coming winter and pulled the winter 16 price down to a two-and-a-half-month low of 39.8p/th on 31 August.
Day-ahead gas moved 10.2% lower to average 31.1p/th. Prices were pushed down by supply generally outweighing demand and flows mostly above the seasonal norm. On 31 August, the contract reached its lowest price in over six years, at 26.0p/th.
Seasonal baseload power contracts on average decreased 3.9% in August, following their gas counterparts lower. Winter 16 power fell 2.8% to £45.8/MWh. Summer 17 power was down 3.2% to £39.0/MWh. Day-ahead power also followed its gas counterpart, down 4.4% to £36.7/MWh.
Oil price slips as demand growth slows and oversupply continues
Brent crude oil prices lost 0.2% to average $46.7/bl in August. Prices have fallen from their near eight-month high of $52.2/bl in early June. This was caused by continuing concerns of oversupply in the market and uncertainty surrounding global markets.
API 2 coal lost 1.3% to average $58.3/t. EU ETS carbon gained 1.7% to average €4.7/t. On 2 August the price of EU ETS carbon fell to €4.4/t, the lowest price since March 2014.
The month ahead: Low prices expected to continue
The IEA projects that oil demand is likely to slow, which could cause a longer period of low oil prices. Meanwhile, Carbon Pulse reported that analysts had cut EU ETS price forecasts by up to 15% as a result of uncertainty surrounding Brexit.