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Energy Market Report – 26th April 2018

Key Points:

  • National Grid established a new record yesterday – 3 days without coal generation – the longest period without coal since the Industrial Revolution.
  • Natural Gas continues soaring and reaching new highs.
  • Oil steady below 3-year high.
  • Dollar hits 7-week high as yields rise.

UK Electricity Prices:

The prompt:

The UK Electricity prompt market is trading higher this morning, amidst rising prices of natural gas. Day Ahead prices rocketed this morning with a 12% jump compared to yesterday’s close. Month Ahead has witnessed limited activity. Temperatures are about 0.5 degrees below average seasonal norms, pushing up domestic demand more than expected. The power generation mix is well balanced between conventional fuel and renewables. (21% of Nuclear, 26% of Gas and 26% Wind). Coal fired power stations are completely switched off for the 4thday in the row.

Forward Curve:

Seasonal contracts have witnessed limited activity so far. Winter-18 closed yesterday’s trading day with prices above £55/MWh, whereas Summer-19 reached almost £45/MWh. The last time these levels were seen was in December 2013. The bullish sentiment across the electricity curve is supported by record high carbon emission prices, rising global prices of oil and the Pound weakening against the Euro.

UK Natural Gas Prices:

The prompt:

The natural gas prices for short-term delivery are firmly up this morning. Day Ahead is currently trading 1% higher than yesterday, whereas Month Ahead is only 0.4% higher. Bullish demand due to cooling temperatures helped to lift up gas contracts. Gas System demand is well supplied, as it is boosted by rising LNG send-outs. The British Merchant LNG vessel arrived at the Isle of Grain from Trinidad and Tobago yesterday, with an Algerian vessel scheduled to berth at the same terminal on Friday.

Forward Curve: –

While the far curve recorded limited activity this morning, the front contracts (Winter-18 and Summer 19) are already trading almost 1% higher than yesterday. Gas Seasonal contracts taking their direction from the prompt and global commodities such as Brent Crude oil and coal prices.  The front Winter-18 contract is currently trading 4-year high and still rising.

Brent benchmark fell to a low of $73.17/bbl before regaining ground to close slightly higher day-on-day. The initial weakness stemmed from a surprise build of 2.2 million barrels to US Crude inventories last week reported by the EIA.