Energy Market Report - Dec18
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Energy Market ReportsEnergy Market Report - Dec18

Energy Market Report - Dec18

Ian Mckenna

by Ian Mckenna 04 December 2018

Report Summary:

Wholesale prices fall for second consecutive month

key-market-indicatorsEnergy Market Brief - December 2018

Many wholesale power and gas contracts fell for a second consecutive month, following commodities prices lower. A high influx of Liquified Natural Gas (LNG) imports across the month, and milder than expected temperatures, have led to comfortable gas supplies and below seasonal normal demand. Looking towards power contracts for delivery in the near-term, day-ahead power fell for a second month, down 3.3% to average £62.7/MWh in November. Prices varied throughout the month amid fluctuating renewables output, which when it is low acts to push wholesale costs higher as more expensive forms of generation are required to meet demand.

The contract dropped to a 14-week low of £56.9/MWh on 6 November amid lower gas prices and forecasts of increased renewables output for the following day. All seasonal power prices fell in November, down 3.3% on average. Summer 19 lost 5.0% to average £55.9/MWh, hitting an 11-week low of £54.0/MWh on 5 November. Contracts have been pressured for a second consecutive month by falling gas and commodity prices, including EU ETS carbon which dropped to €15.2/t. The cost of emitting carbon is factored into the cost of power generation, meaning lower EU ETS carbon prices lead to lower power prices. However, EU ETS prices recovered at the end of the month to ~€20/t. Day-ahead gas dropped 3.5% to average 64.5p/th in November. The contract went as low as 59.8p/th on 5 November, pressured across the month as a total of 11 LNG tankers arrived at UK terminals, boosting gas supplies. All seasonal gas contracts decreased in November, falling 6.6% on average, following oil prices down. Summer 19 gas fell 8.2% to average 56.5p/th, falling to a 14-week low of 54.5p/th on 26 November.