Short-Term Power Slumps on gas glut and improved wind and solar output
Monday 19th June 2017
The start of June has seen a short-term market crash for both gas and power. This was predominantly driven by the closure of the main gas interconnector to Europe, meaning that a glut of gas was trapped in the UK, flooding the market when demand was low – little domestic demand due to the warm temperatures and low generation demand too as renewables filled the gap. On the 7th June, electricity from renewable sources exceeded a record 50% of UK generation, due to blustery, sunny weather.
With regard to Annual power prices, whilst some of the bearish sentiment from short term has come through, increased coal prices have kept declines in check. There are also concerns on the continent about the current heatwave - there are questions about French nuclear stations’ functionality as water levels drop and so fundamental cooling requirement diminishes. This is a frequent summer concern as French stations are not all costal like here and are thus more susceptible to drought.
Oil has gone below the $50 mark again as production exceeds demand. The bearish influence on gas is tempered by the sanctions raised against gas-rich Qatar, with potential LNG impact down the line.