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Energy Market Report – 11th May 2018

Key Points:

  • UK gas prices continue surging across the curve
  • Brent Crude dipped, as traders started taking profits from recent rallies
  • France condemned US move to re-impose sanctions on Iran

UK Electricity Prices:

Electricity prices witnessed limited activity this morning.  Month Ahead is consolidating around £53.50/MWh, while Day Ahead is trading up about £1.1/MWh and consolidating around £52.80/MWh. The power generation mix is largely produced from gas, nuclear and wind. Coal-fired power stations reduced their activity for the second day in a row.

Further out the curve, the UK electricity Win-18 contract is almost trading at £60/MWh, while Sum-19 is about £48/MWh. Despite carbon emissions and crude oil prices falling this morning, the bullish sentiment is still visible and it is supporting the high prices of the UK electricity contracts.

UK Natural Gas Prices:

UK natural gas prices continue surging this morning. Month Ahead rose 0.4% amid several outages at the UK Continental Shelf. As a result, the UK gas demand system is currently undersupplied by 6.5 mcm/d. Demand forecast is at 184 mcm, whereas the current physical flow of gas is at 177 mcm/day.

The curve contracts are also continuing to rally, on the back of bullish sentiment from the oil markets. While Brent Crude dipped yesterday, as traders took a profit from recent high, prices of this global benchmark remain at a 3 year high.

The UK electricity Win-18 contract moved up 1.63%, heading towards 62 p/th this morning, while Sum-19 is trading around 47.25 p/th. Win-19 is consolidating around 55.80 p/th.

Macroeconomics:

Sanctions on Iran, on the back of the broken nuclear deal may have severe repercussions on European Businesses. The Iranian Oil Company partially owns the Rhum gas field in the North Sea. The field supplies about 5% of the UK’s gas demand. Further sanctions on Iran from the U.S may limit investments from Iranian companies around the world. Last night, France condemned the US move to re-impose sanctions on Iran, as the decision may have an adverse impact on the European economy.