Contracts rallied in line with the wider power, oil, carbon and coal markets. Prices have been climbing since mid-March, with annual contracts up around 25%. Gains accelerated in May on the back of significant increases in the oil market. Brent crude prices tested $80/bbl last week as the market awaited new sanctions on Iran, expected to reduce production from the region. Prices across the energy mix have been climbing since. The Winter 18 contract hit new highs from mid-2014 at over 64p/th. Supply-demand fundamentals made little impact on prices beyond the Day-ahead market. A brief spell of below seasonal-normal temperatures boosted the prompt. However, the outlook for the rest of May is above average and demand is expected to fall further. Storage reserves in the UK and Europe have climbed, recovering from five-year lows. Lower LNG imports have been a concern, however this has been partly offset by lower exports to Europe, with more LNG tankers heading directly to the Continent’s ports.
Forward power prices followed the wider commodity mix higher and extended a rally that has been ongoing since mid-March. Further gains in the coal and carbon markets last week added to the cost of generation, providing further support to longer-dated electricity contracts. Weekly gains of up to 8% were seen across the power curve, which helped contracts rally to new multi-year highs. Coal prices broke above previous highs from early 2018 to new multi-year highs at over $90/tonne. The carbon market continued to climb, rising above €15/tCO2e for the first time since 2011 having doubled since the start of the year. Day-ahead power prices found some support from a spell of very low wind and wind supply is forecast to remain low next week. However, the price impact is offset by further falls in overall demand, amid mild and bright weather conditions. Solar output reached a new all-time high last week at 9.4GW, which is also helping cut consumption.