French Nuclear Fears Ease But Rising Oil And Coal Buoy Annuals

Tuesday 7th November 2017

Both gas and power Annuals have seen increases in the last fortnight. Whilst there were initially hints at a downturn on encouraging news regarding the French nuclear issue, this trend was quickly reversed with bullish oil and coal drivers. Brent crude hit a 28-month high, surpassing $60 on news that OPEC propose to extend their production cut through 2018 whilst US inventory figures continue to fall. It will be interesting to see if North American shale producers up their drilling at this higher wholesale level and ultimately correct the OPEC-driven price. Coal increased on industrial disputes in Australia and South Africa (both key coal producers), increased demand from China and India and also from forecasting of La NiƱa weather pattern and its potential impact on Pacific production and shipping in the coming months. Coal rising particularly affects the German market (where baseload is predominantly coal-fired to back the huge volume of renewable generation), so increases here, along with the ongoing uncertainty in France dragged up UK indices.

Short term markets also saw some gains as the first frosts heralded the arrival of winter and the highest UK domestic gas demand since April. Colder forecasts for the next fortnight may further test the gas curve upper limits.