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Energy Market Update – 11th June 2018

Key Points:

  • UK electricity and gas prices continue fallingamid bearish crude oil and coal prices.
  • Manufacturing output fell by 1.4% in April, reaching the lowest level since 2012.

Electricity Prices:

Day ahead and month ahead are trading lower today compare to Friday’s close. Day ahead is currently at £55.50/MWh, while Month Ahead is at £53.08/MWh. However, the bearish momentum may not last long, as tomorrow weather conditions are expected to worsen and we should see an increase in power demand.

Seasonal contracts are also trading lower today. Win-18 is at £59.38/MWh and Sum-19 is at £49.25/MWh. European coal contracts slipped together with carbon emissions and they are below Friday’s close.

UK Natural Gas prices:

UK nat gas has had another bearish day. Day ahead and month ahead contracts slipped about 1.5%, while season contracts dropped by 1%.

The day ahead contract is currently trading at 55.70p/th, month ahead is at 54.00p/th amid the nat gas demand system being oversupplied by 3.8 mcm/d. This week, three cargo ships of LNG are expected to arrive to the UK bring about 620,000 LNG gas in total.

On the curve, season contracts are trading lower on Friday’s close. Winter-18 is currently at 61.60p/th, while Summer-19 is at 48.00p/th. Brent Crude slipped 1% on the Friday’s close.

According to Reuters, oil prices fell on Monday, pulled down by rising Russian production and the highest U.S. drilling activity in more than three years, but found some support from concerns over future Iranian and Venezuelan output.

Macroeconomics:

UK factory output dropped to its lowest level since Oct 2012, while the goods trade deficit rose to its second-highest level on record. According to ONS, Manufacturing output fell by 1.4% in April compared with March, the biggest month-on-month fall since October 2012. At the same time, the Pound slipped. After last week’s positive PMIs data, the recent publication from ONS confirmed that UK economy growth may not be as dynamic as expected.