Carbon and coal prices fell “quite significantly” last week, with the latter hitting a four-year low, according to the latest market report from npower.
Sammy Blay, Client Portfolio Manager at the energy firm said the drop in prices – with coal under $81 (£50.5) per tonne and carbon below €5 (£4.2) per tonne – affected longer dated power and gas contracts last week.
Looking forward, heating demand is expected to rise as seasonal cooler weather sets in. However, with Norwegian flows to the UK and Liquefied Natural Gas (LNG) both forecast to be “fairly healthy”, with three tankers of LNG due to arrive soon, “gains are likely to be modest”, Mr Blay suggested.
He added: “For longer dated contracts, coal prices at four-year low and a weaker carbon market will continue to dampen sentiment, however, the focus will all be on the US Congress as a decision by this Thursday on whether they will raise their debt ceiling and address the current government shutdown is made.
“With so many possible scenarios and outcomes, investors will be fairly uncertain on what to do hence we would expect the UK power and gas market to be fairly volatile or choppy as participants will gauge reactions across the wider financial market.”