Wholesale price snapshot

Day-ahead gas surged higher in September, gaining 20.1% to reach a five-month high of 50.5p/th over the month. Prices were supported by operational outages for UK storage sites and Norwegian facilities, which led to an undersupplied short-term gas system over September.
Short-term power contracts followed the rises in gas, and surged 14.5% higher in September as low wind output and extended nuclear outages meant more expensive gas-fired plant was needed on the system. Day-ahead power rose to a six-month high of £45.4/MWh on 16 September.
But higher spot prices did not seem to impact the longer-term market, as high supply fundamentals for the winter-ahead combined with falling commodity prices and decreasing Russia/ Ukraine tensions to reduce prices. UK gas storage in September reached a high of 97.5%. Winter 14 gas dropped 0.7% to average 59.6p/th and ended its final month of trading 28% below levels seen at the start of 2014. Most longer-term power contracts also fell; however the winter 14 power contract climbed to £51.0/MWh as extended nuclear outages outweighed the impacts of lower gas and coal prices.
Commodities continued their recent downward trends in September. API 2 coal prices fell 3.1% over the month as oversupply fears increased in the market following China’s import ban on low grade coal. Annual prices dropped to a four-year low $74.0/t on 30 September. Brent crude oil prices also fell, dropping 4.6% on weak US and Chinese demand. Prices fell to a 28-month low of $96.4/bl on 30 September.
Looking ahead, warmer forecasts for the month ahead are expected to keep demand for gas heating low, which could pull prices downwards. But with nearly 50% of UK nuclear generation capacity offline, demand for gas from power stations could be higher. This could lead to increased power prices as gas-fired generation will have to make up for the shortfall. Continued falls in the price of Brent crude oil are also expected over the coming month as the International Energy Agency has revised down its global oil demand forecast for the year.