UK NBP natural gas prices rose in July 2017, with the front month Aug-17 contract rising 6.5% and the Winter-17 contract rising 1.7% amid disruptions to the UK’s natural gas domestic and Norwegian pipeline supplies due to extended maintenance. High exports helped further prop up near-delivery contracts, while higher crude oil, weaker GB pound and stronger Asian LNG prices lifted further dated contracts. July saw Asian LNG prices rising 4.5% amid higher demand from India and Japan, and export disruptions in Peru, while U.S. natural gas prices fell 7.9% amid low cooling demand and a rise in domestic production. UK electricity baseload prices followed UK natural gas prices up with the Aug-17 contract rising 2.4% and the Winter-17 contract ending the month 0.7% higher amid firmer European electricity, global coal and European carbon prices, with further support coming from the falling GB pound relative to the euro. The month-ahead Brent crude oil contract surged 9.9% amid signs that the global market was beginning to balance, the threat of U.S. sanctions against Venezuela following an allegedly “sham” Constituent Assembly election, declining U.S. fuel stocks and slowing U.S. drilling growth. European coal prices rose by 7.5%, while Australian coal prices rallied by 16.1% as hot weather in China boosted cooling demand and the country’s hydroelectric power output was restricted. Additionally, infrastructure outages in Indonesia and Australia tightened global supply. EU carbon prices gained 4.0% due to reduced auction supply, increased buying interest, rising global coal and higher European electricity prices. The UK has launched a £45m completion, the Faraday challenge, to support research in electric battery materials, technologies and manufacturing processes. £246m will be set aside by the government for research funding in what could be epochal transformation in an attempt to bring down household electricity bills whilst also producing clean energy. The long-term vision includes creating giant battery facilities around the national grid to store excess wind and solar energy during times of heightened demand, driving this technology into homes across the UK and helping homes generate and store their own electricity. Our predictions for the UK natural gas month-ahead contract made in the previous report proved slightly incorrect. We foresaw reduced demand and high LNG supply weighing on prompt prices, but were surprised by a series of unexpectedly extended outages putting significant upward pressure on the front month contract. We predicted that crude oil prices would continue to fall and keep UK energy prices supressed, however the slowing of U.S. drilling activity and drawdowns in U.S. crude oil stocks drove oil prices higher. Our predictions for UK electricity prices came very close, only slightly off, due to rising UK NBP natural gas and coal prices and the falling GB pound. We foresaw coal and carbon prices peaking earlier and putting downwards pressure on UK electricity prices.
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