Gas and power prices have been driven sharply higher in the first two weeks of August by a variety of factors. Whilst markets are looking to recover from the bullish effects of the heatwave, so other drivers are exerting influence. Hence October ’18 power is at the highest level of any Annual since April ’11. Power has been driven by coal and also carbon, where the price has trebled in the last year. However, the key influence is gas – North Sea strikes and winter storage fears (post heatwave and Beast) are very much in focus, as well as the potential cost of Asian LNG (Liquefied natural gas). The escalating trade war between the US and China suggests the imposition of a 25% Chinese tariff on US LNG – this will potentially lead to a scramble for non-US LNG and inevitable cost implications.

Oil continues to buck the bullish trend, with Brent crude dipping to a three month low. Were it not for this lull, power and gas could have gone higher still.

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