Energy Market Brief – November 2019Seasonal contracts fall amid record LNG imports
The majority of power and gas contracts declined in October, with a comfortable supply outlook, despite some near-term contracts rising as we head into winter. Day-ahead gas prices rose 4.0% to average 26.4p/th in October. Prices recovered from a 10-year low in September as colder weather saw increased demand. However, price gains were capped by continued strong LNG-send-out, which reached an eight-year high of over 110mcm/d on 31 October. November 19 gas inched up 0.1% to average 44.7p/th, despite LNG floating storage near maximum levels. Seasonal gas contracts continued to decline, dropping 3.3% on average. The steady decline of seasonal gas contracts can be attributed to the forecast of high LNG send-out, with European LNG storage at maximum levels and an absence of sufficient demand in the market.
Day-ahead power gained 1.3% to average £37.8/MWh in October. This was despite the contract falling mid-month as high wind speeds saw a jump in wind generation. November 19 power fell 7.0% to average £48.5/MWh, dropping to a low at the end of the October of £44.6/MWh. Seasonal power contracts moved down 2.7% on average, with summer 20 power declining 3.4% to £46.9/MWh. The summer 20 power contract hit a near six-month low of £45.5/MWh on 31 October.
Oil falls on quick recovery after drone strikes, election sees uncertainty for carbon
Brent crude oil fell 4.5% to average $59.5/bl in September. Prices dropped to $57.5/bl on 3 October as Saudi Arabian oil production recovered faster than expected following drone strikes on production facilities. Oil prices were also influenced by the wavering optimism over US-China trade talks, with some progress reported at the end of October, and high US crude inventory levels. Some price support was seen from the possibility of deeper cuts to be made by OPEC. EU ETS carbon prices fell 4.7% to average €24.6/t in October, as prices dropped to a six-month low of €22.4/t early in the month with fears of a no-deal Brexit. Prices recovered later in the month, reaching a high of €26.0/t as a Brexit deal was agreed between the EU and UK; however, news of a general election continued to cause uncertainty.