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Energy Market Report – 4th May 2018

Key Points:

  • Gas month Ahead and Day ahead contracts are trading lower, amid healthy gas supply and rising temperatures.
  • Seasonal contracts keep the bullish momentum, supported by geopolitics and the rising cost of global commodities.
  • The highly expected trade deal between China and the U.S is still unsettled.

UK Electricity Prices:

UK Electricity Day ahead and Month ahead are down 1.33% and 0.1% respectively. Expectations of warmer weather eased off the pressure on the contracts for near delivery. Wind generation is largely unchanged from yesterday. The power generation mix is largely composed from gas (49%) and nuclear (19%) today. Yesterday, EDF Energy reported cracks at Hunterston B nuclear power station situated on the west coast of Scotland. According to experts, the power generation of the reactor may be scaled down by 40% for the rest of this year. According to EDF, Hunterston B can generate up to 965 MW of Electricity. It was established in 1976 and its estimated decommission date is 2023. UK nuclear availability took another “hit” last night with EDF’s Heysham 27 rector reporting an outage. An EDF spokesman has said they don’t expect the unit to return until 20/07/18.

In 2017, the United Kingdom operated 15 reactors across eight sites with a combined capacity of 8.9 GW. The UK nuclear infrastructure is aging and requires substantial financial resources for maintenance and improvements. Further out the curve, seasonal contracts witnessed limited activity.

The Win-18 contract is trading slightly higher than yesterday (up by 0.11%), amid rising costs of European coal.  The far end of the curve is largely unchanged from yesterday.

UK Natural Gas Prices:

The front UK natural gas contracts are trading downwards as comfortable fundamentals prevail. The UK gas demand system is oversupplied by 8 mcm/d, as UK Continental Shelf boosted productions. With an expectation of warmer weather over this weekend, Day Ahead and Month Ahead prices are trading lower this morning. Further out the curve, Winter-18 managed to shed 0.05 p/th. Conversely, Summer-19 and Winter-19 contracts are trading slightly higher, 0.16% and 0.17% respectively. Crude Oil prices are moving lower this morning, amid rising concerns about the trade agreement between China and the U.S as well as the unsettled situation about the nuclear deal between Iran and the U.S.

Macroeconomics:

As widely expected, the two-days of trade talks between China and the U.S. ended on Friday with no breakthrough agreement. According to Eurostat, The European economy slowed in the first quarter of 2018. The GDP growth in Q1’18 was 0.4% compare to 0.7% last year. By comparison, The UK economy grew only 0.1% in the same period.