Rally in power prices sees reversal mid-September

Wednesday 4th October 2017

The rally in electricity and gas prices ran out of steam just after the last market report was released. Power curves were pushed lower by sentiment in the short-term market where windy weather and lower domestic demand meant bearishness returned. This situation was echoed across gas markets, where some value returned to market just prior to the key Winter ’17 close. LNG deliveries alleviated some winter gas supply concerns.

The general decline would probably have been steeper had it not been for the French Tricastin nuclear plant being taken off line, stirring memories of the winter 2016 French nuclear issues that were so prevalent in our reports last year. This led to a 14% spike for October ’17 in France, although this knee-jerk reaction has since eased. There has also been a bullish influence from crude oil, hitting a 24 month high last week, on a trajectory towards $60, although this has since dropped back. We continue to see the global influence of the coal price – be it increased Chinese demand or the effects of South African miners’ strikes. Whilst coal is no longer key to the UK’s fuel mix, it is still important across Europe and so the knock-on effects are still felt.