Coal and carbon maintain power upturn

Friday 22nd September 2017

Gas and power wholesale prices were predominantly subject to bullish market influences through the first part of September. Power was affected as coal prices increased on Chinese demand and also potential European baseload requirement with the ongoing French nuclear fleet issues. Expected reforms to EU emissions trading has also led to a surge in carbon costs. Gas came under pressure from further North Sea refining outages and a lack of LNG shipments coming into the UK. The oil market (another key driver for gas) remained buoyant, particularly after the Gulf of Mexico refining facilities came back online post-hurricane.

Since the attached report was drafted, there has been some bearish influence on markets and a slight correction in wholesale – the hints and rumours of an increase in Bank of England interest rates meant that Sterling surged in value. For energy, the effect versus the Euro is most important as this determines the cost of winter gas imports from Europe – the higher Sterling goes, the cheaper gas becomes, with the inevitable knock on to electricity.