Natural Gas Posted Gains through June on Recovery in Oil, Coal

LONDON, July 13, 2016 /PRNewswire/ -- European power prices strengthened in June as reduced wind power generation in Germany and nuclear outages in France tightened supply/demand margins, according to data released by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets.

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The U.K.'s vote to leave the European Union, an outage at the Rough gas storage facility and a reduction of the Dutch Groningen production quota for gas year 2016 gave the gas market a lot to digest in June.

The immediate impact of 'Brexit' saw the pound fall against the euro, strengthening U.K. gas in pence per therm, with day-ahead gas prices up 1.2 pence to 34.8 p/th June 24 versus a TTF contract down €0.6 per megawatt hour (MWh) to €14.5/MWh.

U.K. power prices remain significantly above those in Continental Europe, so the vote had no impact on import/export flows on interconnectors to France and the Netherlands.

Nevertheless, Continental European power prices, according to Platts Continental Power Index (CONTI)*, increased 18% to €28.33/MWh in June compared to May. On a year-over-year basis the index was down 11.5%.

S&P Global Platts' regional analysis of European power and gas markets showed the following:

Germany: day-ahead baseload power averaged €27.73/MWh in June, up 21% on May amid low wind output, further nuclear outages and rising fuel costs. A day-ahead peakload price of €39.25/MWh June 20 was the highest since January, but the monthly average remained 8% down year over year. Sharp gains in coal and gas prices lifted the year-ahead baseload contract to a 2016-high of €28.55/MWh June 20.

France: day-ahead baseload power prices averaged €27.82/MWh in June, a 15% increase on May as several worker strikes caused unplanned nuclear outages, driving nuclear generation down 8% year over year. The shortfall was covered by a 20% increase in hydroelectric production, and a 130% increase in coal- and gas-fired generation.

U.K. power: day-ahead prices gained 9% month over month to £36.84/MWh, but remained 11% below the June 2015 average of £41.27/MWh. Wet, windy weather had little impact on demand but price volatility ramped up late in the month as nuclear availability dipped, gas-fired generation remained strong and nervous traders tried to make sense of the Brexit vote.

U.K. gas: day-ahead natural gas prices on the U.K.'s National Balancing Point (NBP) trading hub ticked up 13% month over month but remained 21% lower than the June 2015 levels. Norwegian maintenance and low liquefied natural gas (LNG) regasification overshadowed the Interconnector's annual shutdown. Spot and prompt prices came under bearish pressure late in the month due to the unplanned outage at the long-range Rough storage facility, but the bullish strength of the NBP spot during the first half of the month more than covered the late losses. The amount of natural gas used by U.K. gas-fired power stations was close to a five-year high for the January-June period this year.

Dutch gas: on the TTF, continental Europe's most heavily traded natural gas hub, day-ahead gas prices in June averaged 10.5% more than in May. A number of bullish factors drove the contract up, including the annual outage on the U.K. gas interconnector, unplanned Norwegian maintenance, and the Dutch government's preliminary decision to cut the annual Groningen gas field quota to 24 billion cubic meters.

    Platts Continental Europe and U.K. Day-Ahead Monthly Averages

                                                                  Jun-16       May-16       Jun-15

    CONTI* (EUR/MWh)                                                     28.33        23.98        32.02

    TTF (EUR/MWh)                                                        14.41        13.03        20.51

    U.K. Power (BPS/MWh)                                                 36.84        33.85        41.27

    U.K. Gas (pence/therm)                                               34.19        30.33        43.30

    Source: Platts

NOTE: All figures are monthly averages of daily day-ahead contract prices as assessed by S&P Global Platts.

For more information on electric power or the methodology used by Platts in its power assessments, visit the S&P Global Platts website www.platts.com.

* The S&P Global Platts CONTI is a demand-weighted baseload average of day-ahead contracts assessed in Germany, Switzerland, France, Belgium and the Netherlands. The S&P Global Platts U.K. assessments reflect day-ahead contracts assessed for firm delivery of power on the high voltage network of England, Wales and Scotland, and at the National Balancing Point (NBP) for gas. The S&P Global Platts assessments reflect prices as determined between buyer and seller in the open physical markets.

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Global, Americas, Asia: Kathleen Tanzy, + 1 917 331 4607, kathleen.tanzy@platts.com

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SOURCE: S&P Global Platts