Business Energy Market Brief - Feb18
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Energy Market ReportsBusiness Energy Market Brief - Feb18

Business Energy Market Brief - Feb18

Angie Palmer

by Angie Palmer 06 February 2018

Report Summary:

Carbon price hits six-year high

key-market-indicatorsEnergy Market Brief - Feb18

Power and gas contracts experienced mixed trends across January, while commodity prices rose to multi-year highs.

Day-ahead baseload power prices declined 8.6% to £50.9/MWh, easing away from the previous month’s bullish activity. In addition, falling demand and steady gas, coal and nuclear generation eased prices. Summer 18 power lifted 0.1% to average £44.3/MWh. On 12 January, the contact hit £45.4/MWh, its highest level since February 2015. Winter 18 power experienced the largest growth, rising 1.2% to average £50.3/MWh. Summer 19 power lifted 0.8% to average £41.1/MWh. The winter 19 contract rose 0.3% to £47.2/MWh.

Day-ahead gas prices across the month curtailed 13.6% to average 51.4p/th, owing to easing supply concerns following the end of multiple supply outages. On 29 January the contract hit a three-month low (47.8p/th). Across January seasonal contracts experienced mixed movements, and resulted in contracts remaining relatively static on average. The largest loss was observed in the summer 20 gas contract, which fell 1.2% to average 40.4p/th.

Brent crude oil prices lifted 8.0% to average $68.8/bl during January, up from $63.6/bl the previous month. On 25 January prices reached a fresh three-year high of $70.8/bl.

Growth stemmed from tightening supplies from OPEC and non-OPEC members. Prices also rose following the IMF’s improved forecast depicting stronger economic global growth across 2018 and 2019. Comments by the Russian and Saudi Arabian Energy Ministers suggesting an extension to production cuts beyond 2018 added support.

API 2 coal prices lifted 2.1% to average $90.0/t in January. On 3 January, prices rose to their highest level since March 2013 at $91.50/t. Early month highs were driven by strong Asia-Pacific demand, coupled by a weakening US dollar. Robust Chinese demand also supported prices amid concerns of coal shortages ahead of the Lunar New Year. However, by the end of the month weaker European coal demand and high carbon prices put pressure on the coal market.