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Energy Market Report – 1st June 2018

Key Points:

  • UK Gas and Electricity prompt prices witnessed limited activity this morning, however they are expected to rise amid the bullish sentiment from Oil and Coal markets.
  • UK borrowing recovers in April. 

Electricity Prices:

UK Electricity prices are “quiet” this morning. The major price movement is expected during the liquidity window, which is going to be opened at 10:30 this morning. However, the current bullish coal prices in a combination with bullish Crude Oil prices are most likely to push the UK power curve up.

The system is currently well balanced, with gas for power being around 54 mcm/d. In other words, gas is currently the major “stakeholder” of the power generation mix (57%), follow by nuclear (22%). Both wind and coal generation is almost at 0.

Further out the curve, Win-18 closed yesterday at £61/MWh and Sum-19 is at £48.80/MWh. European coal prices for delivery in Dec-18 are up by 0.5% and currently at 87.30 $/T. Carbon emissions are also up and are trading at 15.03 €/T.

UK Natural Gas prices:

UK Natural Gas prices front curve witnessed limited activity this morning. The demand system is well balanced with a healthy from of gas from Norway. The system is currently 1 mcm/d oversupplied. Month ahead is currently trading at 56.70p/th, marginally down on yesterday’s close.

In meanwhile, Win-18 is consolidating around 64p/ph, whereas Sum-19 is at 48.00p/th.

Brent Crude is trading higher this morning, and the bullish sentiment can potentially spread across the UK Nat Gas curve later on today. The European oil benchmark is currently at $77.63/bbl, amid OPEC production falling by 70,000 barrels in the month of May.

While, Brent Crude prices are rising, WTI index, the major American Oil index is falling. The boom of American shell productions pushed the prices down. As a result, WTI is seems to be more profitable to export to Europe.

Macroeconomics:

UK consumer borrowing recovered in April, in a sign that the economy is regaining momentum after a dismal first quarter according to Financial Times.

The UK economy seems to have started recovering, however the value of Pound is still below the level before the EU referendum, when the Pound tumbled by more than 10%. The British currency is currently trading at 1.32 against the dollar and about 1.13 against the Euro.