Weekly Energy Market Report: 20th – 26th August 2018
August 20, 2018
Ignite Energy bring you the latest energy news across the UK and Europe every week. We have the expertise when it comes to translating energy industry consumption trends. Here’s the latest news from the UK, Europe and the rest of the world.
Annual electricity contracts surged to £60/MWh, up 7% in value since the start of the month. This bullish momentum was driven by surging gas, coal, carbon and European power markets. Oil prices were consolidating in the narrow range of $70-71/bbl but were not considered as a main driver behind gas prices. UK nat. gas prices continue to surge despite gas demand dropping week on week. The gas demand system was quite comfortable with plenty of supply from Norway. However, in the anticipation of winter and low stock of gas storage, premiums in front curve products went up.
The UK Energy Market Last Week
- UK natural seasonal gas prices were surging, amid fears of the upcoming winter, low levels of gas storage and limited LNG cargoes scheduled for this winter.
- UK power prices mirrored the movements of the gas curve, reaching an almost 7% increase from the beginning of this month.
- Oil prices dropped to the level of $70-71/bbl amid the escalating trade war between China and the US. For once this commodity was not considered as a driver behind rising UK gas prices.
- Britain’s manufacturing industry has fallen to ninth in the world behind France, reversing a recovery in its performance since the financial crash.
For more in-depth analysis on the UK energy market visit https://www.igniteenergy.co.uk/updates/.
UK Electricity Prices
Long term UK electricity contract Win-19 was trading higher by 0.2% and settled at £59.64/MWh on Friday, Sum-20 closed at £49.70/MWh, down by 0.2%. Win-19 and Sum-20 are currently about £14.07/MWh and £11.81/MWh respectively trading higher than the same time last year. The strengthening of long-term contracts were driven by an overall bullish sentiment spreading across the UK power curve. The rising cost of LNG and coal worldwide in conjunction with the plummeting Pound impacted the UK energy markets. Fear and uncertainty pushed electricity prices up. The front curve contracts such as Win-18 and Sum-19 contracts were also trading up. Win-18 settled at £66.21/MWh and Sum-19 was at £53.88/MWh on Friday. Win-18 and Sum-19 are currently about £19.08/MWh and £13.15/MWh respectively, trading higher than the same time last year
The month ahead settled at £62.45/MWh, while day ahead went down by 0.6% and consolidated around £59.65/MWh. Renewable generation provides enough output for the next day delivery despite weakening generation from wind.
UK Natural Gas Prices
Day-ahead gas contract prices surged significantly week on week. Day-ahead settled at 64.00p/th (up by 4.1% week on week) on Friday, while month-ahead was up by 2.8% and closed at 63.65p/th. The front winter contract (Win-18) finished at 69.04p/th, up by 2.6% week on week, while Win-19 was at 62.12p/th, up by 0.1%. While the front winter prices strengthened week on week, the far curve was trading around the same level as last week. Fear of a lack of significant gas supplies this winter weighed on the front gas curve.
The UK unemployment rate fell to 4% in the last 3 months to June, the lowest level since December 1974. Whilst UK employment was recorded at a very low level, inflation rose in June to 2.5%, the highest level since November 17. In the meantime, the UK manufacturing industry slipped to 9th position in the world, according to EEF. The drop in the manufacturing industry was caused by Brexit negations and the worsening of the UK’s relationship with EU constituents.
What To Watch This Week
- Temperatures are set to be lower this week. With cloudy skies and an increase in wind, we would expect higher renewable output next week, resulting in falling prices at the front curve.
- Gas demand should ease off as the temperatures are expected to fall, meaning gas prices should drop off.
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