Most power contracts experienced gains across October, broadly following gas prices higher. Brent crude oil, API 2 coal and EU ETS carbon prices all reached multi-year highs.
An exception was day-ahead power, which dipped 0.1% to average £46.8/MWh. The month-ahead (November) power contract rose 3.2% to £52.9/MWh, with concerns surrounding French nuclear availability for this winter, increasing the price of power imports. Summer 18 power rose 1.3% to £42.8/MWh, its highest price since June 2015, owing to increased commodity prices. Winter 18 power reached £47.9/MWh, a 0.8% increase.
Day-ahead gas prices across the month subsided 1.4% to average 45.5p/th. However, day-ahead prices reached an eight-month high of 49.2p/th on 9 October, strengthened by rising gas demand for heating and disruptions to Norwegian supplies. Summer 18 gas experienced an uptick of 1.2% to average 42.3p/th, up from 41.8p/th the previous month, as seasonal contracts were supported by higher oil prices. On 30 October summer 20 gas grew to 41.3p/th, the highest price on our records for the contract back to March 2017.
Bullish commodities reach multi-year highs
Brent crude oil prices rose 3.4% to average $57.3/bl across October. On 30 October prices reached a two-year high of $60.8/bl.
Prices started the month at $56.1/bl and expanded upwards throughout the month. Price were influenced by concerns of cuts to oil exports from the Iraqi Kirkuk region due to potential unrest between Kurdish and Iraqi forces. Tightening global supplies and strong demand from India and China also supported prices.
API 2 coal prices grew 1.2% to average $82.4/t in October. On 30 October prices reached $85.8/t, a fresh three-year high. The news of French nuclear outages, increasing coal demand for power generation, and periods of low Chinese stockpiles strengthened prices. Mid-October, supply disruptions in Australia due to strikes increased demand for alternative sources of coal, also forcing prices upwards. EU ETS carbon prices leapt 6.9% to average €7.3/t. On 19 October EU ETS carbon reached €7.7/t, its highest price since January 2016. Bullish prices were likely owing to rising coal demand across Europe due to French nuclear outages.
The month-ahead: Winter Outlook forecasts a fall in gas demand, tight winter power supplies amid nuclear outages
National Grid’s Winter Outlook projects UK gas demand will decline by 3% compared to last year. The paper forecasts gas use from generators to fall along with exports to continental Europe. Such projections could ease winter gas prices, and consequently winter power prices.
However, tight power supplies are expected in November as planned nuclear outages in GB begin, which includes Sizewell B until early December. Coupled with concerns around French nuclear availability and rising UK power exports, short-term power prices may be forced upwards.
