August started with low wind generation as temperatures remained high. In turn this supported pricing as air conditioning demand increased. The temperatures cooled slightly during the middle of the month leading to stronger wind generation and a slight reduction in prices, helped by the availability of European nuclear plants which were struggling to cool during the heatwave. By the end of the month the prices moved sharply as French nuclear availability panicked the market and gas generation needed to pick up the slack, prompting gas transfers from the UK to the continent.
Power finished the month trading at £70/MWh.
Steady gas flows from Norway and the North Sea helped keep pricing levels constant at the start of the month. The whole month has seen more pressure and direction from Asian markets rather than the system fundamentals and gas prices. The import capacity of China has grown following the completion of a number of terminals, which will see the LNG consumption grow in the Far East. The level of LNG cargoes into Europe should drop to normal levels as we move away from the summer and out of the air conditioning period.
General outages towards the end of the month saw flows decline significantly and kept prices high, supported further by exports to France.
The month was bullish for oil, carbon and coal. Carbon prices have increased to their highest level since 2011. Coal and LNG prices have been pushed higher due to the demand from China, where they have experienced a heat wave coupled with a reduction in their coal production.
Oil started the month bearish with larger than expected stockpiles supporting a sell off, but quickly turned bullish as two Saudi Arabian oil tankers were attacked and consumption increased. The main driver in oil has been the stand off between America and China as the super powers continue to battle and forecasters warn of a decline in consumption.
As any homeowner or saver will know, August saw an interest rate increase taking us to 0.75% for the first time in a decade. This added to the volatility from the Brexit discussions, has seen the £ really struggle to gain any strength.
September temperatures are expected to be above seasonal norms, trailing off towards October. Early indications are that November could be cold and drive bullish pricing.
For further discussions about the markets and to discuss strategies, please contact Adam Throup, [email protected].