Highest front Annuals since 2008 seen before sharp downturn

Tuesday 18th September 2018

We have finally seen some bearishness return to the market in the past week, following fresh peaks in front-Annual gas and power curves. A key driver in the downturn has been a slight correction in European carbon trading, where profit-taking has been evident in the last week. This has put pressure on gas, with the consequent knock-on effect on electricity.

Physical gas supplies remain key across Europe. Winter storage levels remain below seasonal norms, following the effects of the heat wave on gas consumption in the summer. There are also questions over LNG shipments for this winter, with Asian markets proving more profitable at present as the effects of the US-China tariff war increase. Physical supply sensitivity is at the forefront of considerations now as we head into gas heating season.

The trade war appears to have intensified today with increased tariffs imposed by the US. This may well have an effect on the long term on commodity prices, as Chinese production levels may slow as markets dry up, so energy demand will drop.