UK NBP natural gas prices surged in August 2017, with the front month Sep-17 contract rising 13.7% and the Winter-17 contract rising 7.2%, amid disruptions to natural gas facilities in the North Sea with both UK and Norwegian infrastructure suffering from reduced output. Lower exports to Belgium via the IUK interconnector offered some resistance, although poor LNG supply out-turn and a limited supply outlook for September added fuel to the upwards pressure. Lower crude oil prices failed to bring down far-dated contracts as the GB pound lost ground for another month amid political uncertainty and lacklustre economic data. Asian LNG prices provided additional support, rising by 5.2%, amid increased demand from South Korea, despite rising global supply. U.S. natural gas prices rose 8.8% amid higher cooling demand and due to hurricane Harvey, which caused disruptions. UK electricity baseload prices followed UK natural gas prices higher, with the Sep-17 contract rising 4.8% and the Winter-17 contract ending the month 8.2% up, amid firmer European electricity, global coal and rallying European carbon emissions prices, with further support coming from the falling GB pound relative to the euro, despite strong wind turbine output across the UK. The month-ahead Brent crude oil contract lost value through the month as hurricane Harvey knocked out more than a fifth of U.S. oil refining capacity (4 mbpd), leading to lower crude oil demand in the country, despite a weakening of the U.S. dollar and falling U.S production. European coal prices rose by 2.6% amid increased Chinese demand as power generators stocked up. Cargoes to China from Australia rose by 4.4% from last year to 7.47 mt while Chinese coal output hit its lowest level since October 2016. EU carbon prices rocketed 13.6% amid rising European coal and electricity prices, as well as reduced hydro-electric availability, French nuclear supply uncertainty and France working together with Germany on EU’s carbon market reform agreement to be finalised by November. August hailed the arrival of the U.S. hurricane season, with hurricane Harvey wreaking havoc across Texas and leading to the shutdown of U.S. fuel infrastructure, precipitating a surge in U.S. gasoline prices and a fall in U.S. crude oil prices with lower refinery demand. The National Oceanic and Atmospheric Administration warned the 2017 hurricane season will be more active than average. Our predictions made in the last report for August’s price movements were in line with the outturn direction, although the magnitude of those price movements was not matched. We predicted the month ahead UK NBP and UK electricity baseload contracts to rise by 4.2% an 4.3%, but they finished 13.7% and 4.8% higher, while the front season W-17 contracts were predicted to rise 2.3%, which fell shy of the 7.2% and 8.2% rise that were observed mainly due to unexpected outages, uncertainty over the upcoming winter’s natural gas supply, rallying carbon prices and weak GB pound.

To download a full copy of the report click here