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Energy Market Update – 4th June 2018

Key Points:

  • UK electricity prompt prices slipped this morning, while the forward curve is trading higher.

Electricity Prices:

UK Electricity prices recovered on Monday morning, after Friday’s pull back. On Friday, the power curve slipped throughout the day. The price direction followed Nat gas price movement. Conversely, today we see prices trading higher. Month ahead is at 55.00, up 0.3% on Friday’s close. Most power is generated from gas today (51%), follow by Nuclear (22%).

Further out the curve, Win-18 is currently at £60.96/MWh, up 1.5% (0.9£/MWh) on Friday’s close, whilst Sum-19 is trading at 49.11 £/MWh, up 0.86%, (0.42 £/MWh). Further dated contracts are also trading higher, but rises were tapered within 0.8%.

UK Natural Gas prices:

UK Natural Gas curve is trading higher this morning. Contracts for the near-term delivery, day ahead and month ahead are at 57.10p/th and 55.25p/th respectively.  The bullish sentiment has been supported by unplanned outages. Centrica just announced problems at Morecambe gas sub terminal resulting in 5.7mcm/d of gas shortage.  Currently, the gas demand system is slightly undersupplied.

Further out the curve, Win-18 is currently at 62.64p/th (1.25%) and Sum-19 is at 48.50p/th (0.94%), Brent Crude together with WTI are trading lower this morning. Oil markets slipped from a 6 year high amid healthy U.S shale production, potential relaxation of production curve from OPEC and Russia as well as Canada producing more oil than the same time last year.

Macroeconomics:

Despite, positive data from the U.S Labour Market, U.S Gross Domestic Product (GDP) grew slightly slower than expected. The U.S GDP in the first quarter of 2018 grew 2.2%, amid expectations of 2.3%.

On Friday, Non-Farm Payroll data recorded an increase of 223,000 in May-18. It is the highest reading in the last 3 months.