UK NBP natural gas prices rose in September 2017, with the front month Oct-17 contract rising 3.4% and the Winter-17 contract rising 3.3%, amid higher UK LDZ demand due to colder weather and lower Norwegian flows owing to planned maintenance at the Kollsnes plant and at the Perenco, Cygnus and Troll fields. In addition, LNG send-outs were down 28.7% from August, crude oil prices rose 9.9% and Asian LNG prices rallied by 38.8% amid increased winter demand from Japan and India. However, there was a large drop in IUK exports to Belgium, down 40.1% and U.S. natural gas prices fell 1.1% amid higher output, high storage build and lower cooling demand with the impact of hurricanes Harvey and Irma, which provided some resistance to further price rises. UK electricity baseload prompt prices ended the month lower, with the Oct-17 contract down 0.3%, amid strong wind power generation, lower European coal prices and a stronger GB pound. Meanwhile, curve prices closed higher with the Winter-17 contract up 0.2%, amid higher UK NBP natural gas prices, carbon prices and firmer European electricity prices due to large drops in French nuclear availability, with EDF temporarily shutting down its Tricastin nuclear reactor until early November. In addition, the French regulator ASN widened safety checks on certain reactor components, which has prompted concerns of a repeat of last winter's nuclear supply tightness. The Brent crude oil month-ahead Nov-17 contract ended up 9.9% from August, supported by OPEC and other non-OPEC oil producers discussing extending the existing 1.8 mbpd oil production cuts until the end of 2018 and as Turkey threatened to cut oil flows from Iraq’s Kurdistan region. European coal prices dropped 0.4% amid profit taking and as the European Commission considered a law that would block many coal fired plants, whose carbon emissions exceed 550 g/kWh, from getting support payments. However Australian and Chinese coal prices firmed due to strong Asian winter demand, falling Chinese coal production and surging Asian LNG prices. EU carbon prices rocketed 19% amid high demand from utilities, upcoming French nuclear reactors safety checks, strong European electricity prices and calls by the French President for a €30/tCO2 carbon price floor in order to reduce emissions and increase the renewables share in the energy mix. During September, the second UK contracts for difference auction took place with offshore wind exceeding all expectations, becoming cheaper than nuclear and taking 95% of the available capacity. The auction saw the UK government award contracts worth £176m to eleven low-carbon electricity schemes, which will generate 3.3 GW, close to 3% of the UK’s electricity demand. Our predictions made in the last report for September’s price movements were mostly in line with the outturn. We predicted the month ahead UK NBP natural gas price to rise by 4.2% and Win-17 to rise by 3.6%, while prices actually rose by 3.4% and 3.3% respectively. We predicted the UK month ahead electricity baseload contract to rise by 4.4% and Win-17 to rise by 3.4%, but they finished down 0.3% and up 0.2% respectively, relatively unchanged from August amid wind power output being much higher than expected, reaching 57% above the seasonal normal level and acting as a large downwards driver.
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