Wholesale price snapshot

Annual power and gas prices fell across June and July, in some cases reaching record lows. In the gas market, fears over winter gas storage levels were offset by decreasing oil prices, a stronger pound against the euro

Annual power and gas prices fell across June and July, in some cases reaching record lows.
In the gas market, fears over winter gas storage levels were offset by decreasing oil prices, a stronger pound against the euro, and news that an additional 15bcf of gas storage capacity had been approved at the Rough facility. The annual October 15 gas contract initially rose in June, reaching a high of 47.0p/th, before falling to an average of 46.0p/th at the end of the month. It then fell by 2.7% in July to average 44.7p/th. The winter 15 gas contract dropped 2.3% to 47.0p/th, reaching a low of 45.8p/th on 23 July; the lowest winter contract price since 2010.
Power contracts followed gas prices in rising initially in June, before falling lower. Spot power and gas contracts increased early in the month, as gas generators were running at their highest level in many months owing to a significant fall in both wind and coal-powered generation. But the Greek debt crisis later caused a weakening of the euro versus the pound; this made imports much cheaper, and led to a decline in contracts. The winter 15 power contract was down 1.0% to average £45.4/MWh, a record low for the contract.
Leaders of international oil organisation OPEC met in Vienna on 5 June and decided not to cut oil production levels. This caused Brent crude oil to fall 2.7%, averaging $64.0/bl. Surprisingly high US inventory levels reported by the International Energy Agency also contributed to lower prices. Brent crude oil finished June at $62.6/bl, and then decreased 9.7% the following month to average $57.7/bl - the biggest monthly drop since January. Prices were weighed down by the deal agreed with Iran to scale back its nuclear programme in return for lifting oil export sanctions, and losses on the Chinese stock market. Brent crude oil finished July at $52.9/bl, a six-month low.
Average allowance prices in the EU Emissions Trading Scheme increased by 3.0% to average €7.7/t in July. Prices reached a high of €8.1/t on 23 July - their highest level since November 2012. Increases were driven by the approval of the Market Stability Reserve, which is effective from 2019 and is intended to prevent extremes of allowance supply within the scheme.
API coal lost 0.9% to average $58.0/t in July, over a quarter (25.8%) below this time last year. Low prices have been driven in part by a switch in China away from coal to gas-fired generation, reducing demand. The trend has been exacerbated by the Clean Power Plan being introduced in the US.
Looking ahead, fears over winter gas storage could push seasonal contracts higher – restrictions at the Groningen gas field, combined with storage already below levels this time last year, have sparked concerns over the winter supply outlook.
 

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