Short term energy prices saw a surge in the first two weeks of July on the back of low renewable output and a tightening gas supply. Power prices traded up close to £50/MWh, its highest level since early April, having dropped to near two-year lows at the start of the month. Wind output dropped to less than 2% of supply while solar output also fell due to cloudier weather conditions.
The latter half of the month saw short term markets turn bearish as gas prices dropped and renewable generation, particularly from wind, increased sharply. However, this run was relatively short-lived as prices once again found support from a sharp drop in wind output at the end of July.
Cooler and wetter weather than normal is forecast for much of August, which could limit consumption and therefore stabilise short term energy prices.
Long term energy markets followed a similar trend to short term prices in July. Rallying carbon emission allowances, and oil and carbon markets provided the support. Carbon prices hit a new 13-year high of EUR 29.73/ tonne, bolstered by a reduction in the volume of allowances in the August auction. If prices can break the Euro 30/ tonne resistance barrier they could well rise further.
Meanwhile, oil markets also initially spiked up to $67/barrel in the face of escalating tensions between Iran and the West along with tropical storms disrupting US oil output. Throughout the month, prices remained volatile, torn between ongoing concerns over a slowdown in global economic growth and large falls in US oil stockpiles.