The majority of power and gas contracts along the forward curve rose in April, with some reaching multi-year highs. Prices were broadly supported by a bullish commodity market which posted fresh highs for oil and carbon.
Gas on the day-ahead market was an exception, dropping 17.8% to average 51.0p/th, owing to falling demand, rising temperatures and comfortable supplies – April saw nine LNG deliveries to the UK, the highest in a year. Month-ahead gas (May) hit fresh highs not seen since February 2017 in the middle of April, rising 7.7% to average 49.7p/th. Seasonal gas contracts out to winter 2020 gained 4.7% on average, continuing to be supported by higher oil and coal prices. Winter 18 gas jumped 5.8% to 55.5p/th, and summer 19 gas moved 5.7% higher to 42.83p/th.
Day-ahead baseload power fell 12.4% to average £50.7/MWh, weighed on by its gas counterpart, rising solar and wind generation, and lower demand levels. The month-ahead contract rose 7.3% to £49.5/MWh. All seasonal baseload power contracts rose, increasing on average by 6.3%. Winter 18 power climbed 6.0% to £54.3/MWh, and summer 19 power gained 7.0% to £44.0/MWh.
Commodities continue with bullish momentum
Brent crude oil prices grew 7.7% to average $71.6/bl during April, up from $66.5/bl the previous month. Prices hit a three-and-a-half year high on 23 April at $75.4/t.
Prices started the month at $70.4/bl and stayed above $65.0/bl throughout the month, climbing to $73.8/bl at the month’s end. Oil prices have been driven by political tensions throughout April, with rising tensions between the US and Middle Eastern countries. However, a strengthening US dollar towards the end of the month and rising US output capped price gains and reduced the impact of OPEC’s continued supply cut.
API 2 coal prices rose 5.7% to average $80.8/t, up from $76.4/t the previous month. This is the highest monthly average since January this year. Coal grew at the start of the month with falling Australian supplies caused by cyclone Iris. April’s growth came despite falling UK and European demand. However, thermal coal demand increased across Asia.
EU ETS carbon prices continued with bullish momentum, increasing 15.9% to average €13.4/t (up from €11.5/t). On 19 April prices reached a fresh seven-year high at €14.2/t.
The month-ahead: National Grid forecasts lower power and gas demand for summer
April saw the release of National Grid’s Summer Outlook report. UK gas demand this summer is projected to be 3.5% lower than the previous summer, largely owing to lower gas demand for power generation amid higher renewables output. In addition, peak power demand is set to be 2% lower than last year, while a 3.5% drop in minimum power demand is forecast.
While National Grid indicates bearish fundamentals for gas and power markets, prices are still significantly above their levels this time last year.
