Moving in to summer, the month commenced with downward pressure on fundamentals but the Trump effect really impacted mid-May as he withdrew America from the Iranian Nuclear Deal. This sent the Oil markets into a spin as Iran had built up a reasonable market share and continuity of supply became a fear.
Power
- May started lower as the weather forecasts were revised warmer due to a jet stream bringing in a longer period of warm pressure
- Wind generation was supported by the jet stream and solar benefitted from the longer days
- Interconnectors imported to the UK at near capacity
- Comfortable fundamentals towards the end of the month were offset by USA cancelling their involvement in the Iran deal. Winter 2018 ended £1/MWh up
Gas
- Throughout the month there were a number of gas plant outages supporting increases but as these were rectified flows commenced into the UK
- System shortness was supported by mid-term storage facilities
- Warmer temperatures reduced the residential demand which brought flexibility to the system
Oil
- Brent hit highs of $80/bbl due to the supply worries caused by USA/Iran
- Prices softened as OPEC signalled an increase in production in the second half of the year
£
- Weak service sector growth contributed to a fall in the £ early on in the month
- The decline was supported by the Bank of England decision to keep interest rates level
- The £ ended the month stronger as the political situation in Italy brought about risk and weighed on the Euro
Outlook
- There are a number of LNG tankers due to arrive into the UK and Continental Europe, which will help with the gas flows going forward
- The key drivers for June will be the gas storage levels and the production levels of oil
For further discussions about the markets and to discuss strategies, please contact Adam Throup, [email protected].
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