Wholesale price snapshot June

Strong supplies see gas and power dip
The past two months have seen increases in oil and carbon prices. However, GB power and gas prices have fallen over the same period, with strong supply levels and forecasts of low summer demand being the main drivers of decreasing prices.  
The annual October 15 power contract averaged £44.6/MWh in May, a 1.1% reduction on the average April price.
Though weak wind generation pushed day-ahead prices up 7.4% to average £44.0/MWh in April, the system was comfortably supplied throughout May. Demand fell as temperatures increased with summer approaching. The day-ahead contract averaged £41.1/MWh over last month.
The healthy supply outlook was mirrored in the gas market, with reductions in gas prices over May in particular. The annual October 15 contract averaged 46.7p/th in May, a reduction from April’s average price (47.6p/th).
Brent crude oil averaged $65.9/bl in May, a rise of 9.1% from April when it stood at $60.4/bl. Prices were pushed upwards during the month by continued strife in the Middle East – which raised security of supply concerns – and falling US inventory levels. However, the International Energy Agency’s monthly Oil Market Report raised supply forecasts for the rest of 2015, which dampened some of the gains over May, with the continued prospect of oversupply in the market.
Coal prices continued to struggle last month, as a supply surplus continued in the market. Prices averaged $57.6/t in May – a small gain of 1.4% from April, but 30.3% below the May 2014 average.
There were significant carbon market reform developments in May, with a draft Market Stability Reserve (MSR) bill being approved by both the EU Council and the European Parliament environment committee. The MSR would remove surplus carbon allowances from the system, thus boosting prices. EU ETS prices averaged €7.5/t in May, up from €7.1/t in April.
In April, National Grid published its 2015 Summer Outlook Report. The peak weather-corrected high summer period demand is the lowest ever, at 37.5GW. The company attributed this to the increase in embedded solar PV installations, which have nearly doubled year-on-year from 2.4GW to 4.4GW. Low demand, as solar power generation surges higher in the summer, is likely to weigh on day-ahead power prices.