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Energy Market Report – 1st May 2018

Key Points:

  • Electricity and gas seasonal contracts edged down this morning, after reaching a 5 year high yesterday.
  • ONS reported UK GDP growth in Q1’18 lower than expected.
  • Global commodity markets are waiting for a decision about the future of the nuclear deal between Washington and Tehran.

UK Electricity Prices:

The spot electricity prices (Day Ahead) are trading lower in line with prompt (Month Ahead). Falling natural gas prices weighed heavily on the UK electricity curve. Day Ahead and Month Ahead is trading 2.01% and 1.79% down respectively.

Further out the curve, seasonal contracts also inched down amid falling prices of carbon allowances and Brent Crude. The front season Winter-18 is down today by 1%, after reaching a 5 year high yesterday. Further contracts are also trading lower, however losses are not that pronounced, for instance Sum-19 is only 0.7% down on yesterday’s close.

UK Natural Gas Prices:

The prompt British wholesale gas prices slipped on Tuesday, after the weather conditions changed this morning meant gas supply from Norway has been restored. Day Ahead and Month ahead are trading about 2% lower than yesterday.  The gas demand system is currently about 2 mcm oversupplied. In the view of rising temperatures today, we would expect rather bearish sentiment spreading across the front contracts.

Further out the curve, seasonal contracts also edged down this morning. Pressure has come from Brent Crude oil prices which are trading lower this morning. The oil market is holding its breath, as the president of the U.S is making decision about the future of nuclear agreement with Iran establised in 2015.

Macroeconomics:

The Office for National Statistics (ONS) reported that The UK economy grew at its slowest rate since 2012 in the first quarter of the year. Gross Domestic Product (GDP) grew 0.1% vs expectations of 0.4%. As a result, the Pound is trading lower against the Euro.