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Energy Wholesale Market Review, 12 October 2018

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All commodities fell this week, with coal and oil ending multi-week climbs. Pressure from curtailing commodity prices, coupled with an increase in wind output and warmer temperatures, cause wholesale power and gas contracts to retreat, with many also hitting lows on 11 October. However, the recent high prices of gas have attracted several LNG tankers to the UK, with cargoes from the US and Qatar arriving this week. Contracts across the curve fell this week, with day-ahead power falling 3.5% to £63.9/MWh amid a surge in wind generation. Seasonal power contracts were down 6.5% on average week-on-week, as lower commodity prices pressured contracts along the curve. Gas contracts along the curve fell week-on-week, with day-ahead gas dropping 7.6% to end the week at 64.8p/th as temperatures are forecast to remain near seasonal normal levels. The weekly average Brent crude oil price fell for the first time in two months, averaging $83.1/bl. Prices fell below $80.5/bl at the end of the week as the US announced it would discuss potential waivers for Iranian imports and as the US stock market fell for a sixth consecutive day amid a slowdown in the global economy and the US-China trade dispute. API 2 coal also fell, dropping for the first time in 10-weeks to average $96.7/t after hitting a five-week low of $94.0/t on 11 October. EU ETS carbon prices reversed the previous week’s gains, losing 2.6% to average €20.6/t. Prices plummeted to their lowest since 20 August, dropping to €18.3/t on 11 October.

Baseload electricity
Day-ahead power fell 3.5% to end the week at £63.9/MWh. Prices dropped to a three-week low of £61.4/MWh on 11 October as high wind generation was forecast the following day. November and December 18 power decreased 4.6% and 3.8% to £67.3/MWh and £68.3/MWh, respectively.		Annual April 19 power decreased 6.2% to £60.7/MWh. The contract is £1.1/MWh (1.7%) lower than the same period last month, and 41.0% above the same time last year when it was £43.0/MWh.
Forward curve comparison		Annual October Contract

Peak electricity
Day-ahead peak power continued to decline, dropping 3.0% week-on-week to £68.0/MWh. This was £4.1/MWh above its baseload counterpart. Month-ahead peak power went down 4.2% to end the week at £75.0/MWh, £7.7/MWh above its baseload counterpart.		Week-on-week, annual April 19 peak power went down 6.1% to £66.5/MWh. The contract is £5.8/MWh above its baseload power counterpart. The contract was 1.5% below its price last month (£69.3/MWh) and 35.3% higher than its value last year (£49.1/MWh).
Forward curve comparison		Annual October Contract

Seasonal power prices
Seasonal baseload power contracts		Seasonal baseload power curve
Seasonal contracts were down 6.5% on average. Summer 19 power fell 6.5% to £58.0/MWh, falling to a seven-week low of £57.5/MWh on 11 October. Winter 19 power was down 5.9% to £63.4/MWh.		All seasonal peak power contracts decreased this week, down 6.0% on average. Prices followed a decrease in gas prices, with seasonal gas prices down 7.7% on average.

Commodity price movements
Oil and Coal		Carbon
Brent crude oil fell for the first time in two months, dropping 1.9% to average $83.1/bl this week. Prices dropped after the US announced it would discuss potential waivers for Iranian imports. Brent crude oil fell below $80.5/bl on 12 October, as the US stock market fell for a sixth consecutive day amid a slowdown in the global economy and the US-China trade dispute. OPEC’s Secretary-General announced that the group believe the oil market is well supplied and voiced concerns of potential oversupply in 2019. API 2 coal fell for the first time in 10-weeks, down 2.7% to average $96.7/t this week. Coal prices hit a five-week low of $94.0/t on 11 October.		EU ETS carbon prices fell 2.6% to average €20.6/t. Prices plummeted to their lowest since 20 August, dropping to €18.3/t on 11 October. Temperatures across Europe were above seasonal normal levels reducing power demand and supplies from thermal generation. News of a German court’s ruling that power generator RWE must stop tree clearing operations at Hambach forecast, has reduced demand for EUA permits as it affects operations at two of the company’s major lignite-fired power plants. Although the future of the UK’s carbon pricing policy is uncertain post-Brexit, the European Council is due to meet on 18-19 October, and could provide a clearer picture for Brexit plants.

Wholesale price snapshot