Catalyst Business Energy Market Brief July 2013
Market Leading Business
Energy Consultants
Your Trusted Commercial Energy Partners
Energy Market ReportsCatalyst Business Energy Market Brief July 2013

Catalyst Business Energy Market Brief July 2013

Chris Hurcombe

by Chris Hurcombe 08 July 2013

Report Summary:

Concerns about winter supply support seasonal prices

Concerns about winter supply support seasonal prices

Despite a notable reduction in coal prices and lower summer demand, longer-term power prices remained stable in June as a result of rising gas prices. The annual October 2013 gas price increased 0.4% to a monthly average of 67.8p/th. This followed the announcement that the Troll gas field in Norway would be operating at a reduced output this winter, which led to concerns that the UK could see gas supplies tighten.

Power prices were pushed up by the rising gas price, but remained at a monthly average of £51.7/MWh. This came despite a significant fall in the value of coal, which dropped to a three-year low of $85.3/t on 25 June as a result of market oversupply.

On average oil prices were flat. The monthly average price of Brent crude oil was $103.2/bl, 0.1% higher than May, as concerns about economic growth in China and the US were offset by the continuing conflict in Syria.

Monthly average carbon prices rose 23% to €4.31/t in June on the back of news that the European environment committee had voted to send an updated back-loading proposal to the European Parliament for a vote.june 2013 crude oil and annual wholesale gas and power prices

June 2013 Crude Oil and Annual Wholesale Gas and Power Prices

Short-term prices tumble

The closure of the UK – Belgium gas interconnector meant gas exports were curtailed and there was more supply available to the UK. This factor pushed the day-ahead gas contract down 9% to a monthly average of 60.0p/th. Nevertheless, despite this fall, the contract is 10% higher than in the same period last year.
High wind speeds, warmer weather and falling gas prices helped to lower short-term power prices this month. The day-ahead power contract fell 3% month-on-month. Prices averaged £47.0MWh over the month, but reached a 2013-low of £44.0/MWh on 21 June.

june 2013 spot power prices and temperatures

June 2013 Spot Power Prices and Temperatures

Looking ahead

An announcement about the reduction in volumes from Norwegian gas fields this winter will push up prices as concerns about security of supply put a premium on the price of power and gas for delivery this winter. This is likely to be compounded as stakeholders begin to digest the information in Ofgem’s latest electricity capacity assessment. It is likely that the price of long-term power and gas this year will be determined by how well the UK system can cope with supply volatility from LNG and Norway.
Over the longer term bills will also see upward pressure as a result of Ofgem’s planned reforms to boost trading in the wholesale market. It is estimated the reforms could increase the cost of wholesale power by around £0.04/MWh

.june 2013 annual gas prices

June 2013 Annual Gas Price Graph

Longer-term gas prices increased following the announcement that Norwegian gas supplies would be lower than expected over the winter. There is also concern that gas storage will not be full by the end of the summer, which will mean there is less gas available for the winter. Annual October 13 gas was up 0.4% to 67.8p/th, 9% higher than year-ago levels and 3% higher than the 2012 average.June 2013 spot gas prices

June 2013 Spot Gas Prices

Warm weather and comfortable supplies have reduced near-side gas prices. The closure of the UK-Belgium gas interconnector meant gas exports were limited and more gas was available to supply British demand. Day-ahead gas prices fell 9% to 60.0p/th in June compared to 66.0p/th in May. The day-ahead gas contract is now 10% higher than the average for June 2012.june 2013 annual power prices

June 2013 Annual Power Prices

On average longer-term baseload power was stable last month as gas contracts rose but coal dropped notably. Annual October 2013 power averaged £51.7/MWh in June, and reached a two-month high of £52.9/MWh on 17 June. The contract is now 3% higher than June 2012 but still 2% lower than the 2012 average.june 2013 spot power prices

June 2013 Spot Power Prices

The falling short-term gas price, a reduction in demand and strong winds helped day-ahead baseload power fall to a six-month low of £44.0/MWh on Friday 21 June. The monthly average day-ahead prices dropped 3% to £47.0/MWh, although this was still 11% higher than June 2012.

june 2013 key energy market indicators