The market update - July
Longer term power contracts were extremely weak towards the end of June, almost revisiting the yearly lows we witnessed in March. However, buyers stepped in at the beginning of July as benchmark fuels strengthened. Gas, Carbon, Coal and Brent all rallied in unison, with French nuclear outages and reduced gas flows from Norway adding further support to the near curve. Seasonal power contracts spiked by more than 10% in the second week of June, however this strength proved to be short-lived.
While the wider-energy complex (that’s the collective term for coal, oil, gas and carbon) has maintained its strength, gas prices have reversed sharply over the past couple of weeks and power prices have followed suit. Despite the presence of a number of bullish drivers, the gas surplus continues to cap the potential for any significant upside. LNG deliveries have slowed somewhat due to stronger demand from Asia, but with storage sites across Europe nearly at capacity, injection demand is significantly lower than usual.
There has clearly been a high degree of market indecision at the current price levels, with some volatile trading periods. Overall, gains on power contracts have been limited to 2-3% over the course of the month.