Power
- Supply started the month comfortably as demand reduced due to warmer temperatures around Europe. The nuclear capacity in France increased following a period of maintenance, but the interconnector’s capacity was halved to 1GW due to maintenance and limited the supply to the UK.
- UK nuclear supply dropped to 6.3GW and this provided pressure to the system and increased pricing in the second week. Strong performance from both solar and wind generation helped bring the prices back down.
- The next trigger came towards the end of the month when healthy renewables and supply from Interconnectors saw pricing ease off further.
Gas
- The bulls were leading the market early in the month, with low supply from unplanned outages and a lower than anticipated level of storage withdrawals. Once the outages were fixed, the supply became long and improved temperatures further supported as gas fired generation was scaled back.
- Towards the end of the month we saw pricing starting to creep upwards again amid concerns of a cold November, and consistently increasing oil prices.
Underlying Fuels
- Carbon has been a key driver in pricing over the last few months. The prices increased from €20/tCO2 to above €25/tCO2 before being sold heavily and ending the month back at €20/tCO2.
- Coal rose from £90/tonne to £99/tonne.
- Oil started the month on an upward trend as severe weather in America caused panic over supply, but an increase in the US oil inventories pressed down on the prices. An announcement from OPEC stating they wouldn’t increase oil production to counteract the effect of US sanctions sent oil prices back upwards.
- The £ remained volatile throughout the month, following comments around Brexit which renewed optimism over an agreement there was a strengthening, then a hard Brexit become most viable and the £ fell, but bounced back to £1 to €1.126 by the end of the month.
Outlook
- Three LNG cargoes are expected during October, supporting the influx of gas into the UK system. The number of LNG cargoes could remain high throughout winter if the gas prices remain high.
- Weather will play a large part in the winter pricing, with forecasts changing on a weekly basis as to whether we will see warm or cold spells throughout the period.
For further discussions about the markets and to discuss strategies, please contact Adam Throup, [email protected].
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