UK NBP natural gas prices rose in October 2017, with the front month Nov-17 contract increasing 0.6% and the Summer-18 contract rising 4.7% amid higher UK LDZ demand due to colder weather, outages, higher Asian LNG, crude oil and coal prices. Asian LNG prices increased by 8.1% amid the upcoming peak-demand winter heating season and soaring consumption in China due to its huge gasification programme. In addition, LNG send-outs were down 37% from September, despite 6 LNG tankers unloading their cargo in the UK over the month. However, there was a large drop in IUK exports to Belgium, down 27% as the winter flip to imports approaches, as well as U.S. natural gas prices falling 3.7% as production climbed to a record high, encouraged by prices steadily rising throughout the year. UK electricity baseload prompt prices ended the month higher, with the Nov-17 contract up 0.1%, amid rising demand as we head for winter and higher UK NBP natural gas, coal and carbon prices, as well as higher European electricity prices as France could face a tight winter power supply margins due to nuclear generation falling to as low as 64% of available generation amid outages. Curve prices closed higher with the Summer-18 contract up 3.6%, amid rising UK NBP natural gas, European electricity, coal and carbon prices. The Brent crude oil month-ahead Dec-17 contract ended up 6.7% from September, amid major OPEC exporters and Russia planning to extend the 1.8 mbpd oil output cuts to the end of 2018, geopolitical tensions and as oil exports from southern Iraq fell by 110,000 bpd during the month, adding to the drop in flows from the northern Kirkuk fields when Iraqi forces retook control from Kurdish fighters. European coal prices surged 12.4% amid a large increase in Chinese demand as China’s coal imports rose to their highest level since December 2014 as safety and environmental inspections curbed output at domestic miners. Also supporting prices, many countries are attempting to increase coal stocks and prepare for a tight winter supply. EU carbon prices increased 4.2% amid rising European electricity, coal and crude oil prices, as well as the French president presenting a series of proposals to reform the EU, which included proposals to increase carbon emission prices to give certainty and incentive to investors and to help support the EU energy transition. £2.5 billion will be invested into UK’s low carbon technology and infrastructure in an attempt to comply with ambitious carbon emission reduction targets. On 12th October, a clean growth strategy was published, outlining the vision for a low carbon economy and a plan to reduce reliance on carbon producing power sources, while including the extension of the Energy Company Obligation until 2028. More money will be invested throughout a number of targeted sectors with businesses, homes and public transport at the centre of the strategy. Our predictions made in the last report for October’s price movements were in line with, but exceeded the outturn, while curve price movements were identical to our forecast. We predicted the month ahead UK NBP natural gas price to rise by 5.7% and Sum-18 to rise by 4.3%, while prices rose by 0.6% and 4.7% respectively. We predicted the UK month ahead electricity baseload contract to rise by 7.5% and Sum-18 to rise by 3.4%, and they finished up 0.3% and up 3.6% respectively.
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