This week, nearly all power and gas contracts dropped week-on-week, with only day-ahead power rising as record breaking temperatures increased cooling demand. Warmer temperatures also supported API 2 coal prices to a three-month high, which in turn saw higher demand for EUAs and lifted EU ETS carbon prices to a 13-year high just below €30/t. Support for EU ETS carbon prices has continued as August approaches, when auction volumes are due to halve to 33mn EUAs. Oil prices on the other hand were down slightly week-on-week, as slowing economic growth is expected to dampen demand for oil for the remainder of 2019. All gas contracts fell further, day-ahead gas was down 5.7% week-on-week to 27.9p/th, the lowest since 5 July. The gas system has remained oversupplied despite an unplanned outage at Langeled which resulted in flows dropping to zero. The end of this week’s heatwave on Friday also pressured prices as cooling demand dropped and there was therefore less gas for power demand as CCGT generation lowered. The day-ahead power contract was up 3.3% to end the week at £41.0/MWh, an increase of 13.6% from the same time last month (£36.1/MWh). Prices were supported by this week’s increase in cooling demand. On average, seasonal baseload power contracts were down 1.0% week-on-week, mirroring their gas counterparts. Winter 19 power dropped 2.6% to £56.4/MWh, up 2.3% from the last month (£52.4/MWh).
The day-ahead contract reversed the previous week’s decline, rising 3.3% to £41.0/MWh.
August and September 19 power were down 2.8% and 5.3% to £39.9/MWh and £41.1/MWh respectively.
Annual October 19 power declined by 1.7% week-on-week to £53.4/MWh.
The contract is 3.1% higher than the same time last month (£51.8/MWh), and 2.5% above the same time last year (£52.1/MWh).
Forward curve comparison
Annual October Contract
Day-ahead peak power was up 2.7% to £43.2/MWh, £2.2/MWh above its baseload counterpart.
Day-ahead peak power is 28.1% lower than the same time last year when it was £60.0/MWh.
August and September 19 peak power decreased 1.5% and 4.5% to £43.4/MWh and £44.4/MWh respectively.
Annual October 19 peak power was down 1.5% to £59.0/MWh, remaining £5.6/MWh above its baseload power counterpart.
The contract is 2.7% above its value this time last month (£57.5/MWh), and 1.4% higher than the same time last year when it was £58.2/MWh.
Forward curve comparison
Annual October contract
Seasonal power prices
Seasonal baseload power contracts
Seasonal baseload power curve
On average, seasonal baseload power contracts were 1.0% lower, mirroring their gas counterparts.
Winter 19 power fell 2.6% to £56.4/MWh.
Summer 20 power was down 0.7% at £50.3/MWh.
Seasonal peak power contracts declined by 1.2% on average.
Winter 19 peak power dropped 2.1% to £63.1/MWh.
Commodity price movements
Oil and Coal
Brent crude oil was down 2.1% to average $63.7/bl.
Oil prices continue to be pressured by weaker global economic growth, which would result in lower demand for oil. Despite this, prices were supported by another weekly decline in US crude stocks the previous week, which pushed prices above $64/bl on Wednesday.
Rising tensions in the Middle East between Iran and the US have also provided some uplift to prices at times, with an increase in insurance for tankers traveling in the Strait of Hormuz adding to prices.
API 2 coal prices rose 2.3% to average $70.2/t, with prices reaching $71.2/t on 22 July, the highest since 29 April. Coal prices were supported by an increase in demand, as the heatwave in NW Europe led to higher cooling demand and nuclear outages in France pushed coal-fired generation into the generation mix.
EU ETS carbon prices averaged €29.1/t, up 1.8%.
Within-day carbon prices hit a 13-year high of €29.95/t on 24 July, but ended the week nearer €28/t.
Carbon prices have been supported by lower wind generation and hotter temperatures across NW Europe, with weaker wind output leading to an increase in conventional power generation and cooling demand rising as temperatures have been above seasonal normal levels. In France, this has coincided with reduced nuclear fleet availability, further exacerbating the pickup in coal generation.
Although the heatwave has ended, support for carbon prices will continue into August as auction volumes are due to halve to 33mn EUAs.
Energy Aspects lifted its Q319 EUA price forecast to €27.1/t, up from €24.3/t in its previous forecast. However, it warned that a no-deal Brexit could result in prices dropping back below €20/t.
Wholesale price snaphot
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