UK NBP natural gas prompt prices fell in December, with the front month Jan-18 contract falling 0.7% amid strong imports throughout the month and high volumes of wind power generation, while the Summer-18 contract rose 1.5% amid surging Asian LNG spot prices, rising crude oil and coal prices, as well as a weaker GB pound. Also supporting prices during the month, the Forties gas and oil pipeline was shut down after a hairline crack was revealed during inspection. Asian LNG spot prices rose by 13.7% amid Chinese and Japanese deals, as well as a series of major European pipeline and production outages coinciding with high demand and freezing weather. U.S. Henry Hub natural gas prices dropped by 2.4% rising U.S. total gas rigs rising by 2 to 182 and lower than expected heating demand for the second half of the month.

UK electricity baseload prompt prices ended the month lower, with the Jan-18 contract down 0.4%, amid falling UK NBP natural gas prompt prices and surging wind power generation, despite a weaker GB pound, higher coal and carbon prices. Curve prices closed higher, with the Summer-18 contract up 1.5%, amid rising demand, firmer UK NBP natural gas curve, European electricity, coal and carbon prices, as well as a weaker GB pound.

Brent crude oil month-ahead Feb-18 contract ended up 5.2%, finishing the month at the highest value since May 2015, amid rising global demand and tightening supply as major OPEC exporters and Russia agreed to extend the 1.8 mbpd oil output cuts until the end of 2018. Prices were also supported by the shutdown of the Forties 450,000 bpd pipeline during the month.

European coal for 2019 delivery rose 5.9%, hitting a four and a half year high amid soaring Chinese demand, which saw the world’s largest coal importer experience large spikes during the month due to natural gas shortages. However, Global coal demand is likely to be subdued over the next five years, growing at just 0.5% a year, mainly due to lower consumption in China and the growth of the renewables industry.

EU carbon Dec-18 contract jumped 8.2% following in line with European electricity, driven by firmer crude oil and coal prices, which both hit long term highs towards the end of the month. Since our last report, 20 new companies have joined the international alliance of 26 nations pledging to fight climate change by phasing-out coal generation by 2030 in rich countries and by 2050 in the rest of the world.

UK parliament recently approved the contracts for difference (CfD) and Renewables obligation (RO) exemptions for Energy Intensive Industries (EIIS). The new regulations are expected to save major electricity users like steel and chemical companies around £100m a year in energy costs.

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