Weekly Energy Market Review – 12 January 2017

Weekly Energy Market Review – 12 January 2017

Year-ahead gas and power prices have risen sharply in the last week, with the weather the main factor.

Year-ahead gas and power prices have risen sharply in the last week, with the weather the main factor. A cold snap from the end of this week and deepening further into January has contributed to the rise in energy prices. Concerns over the ability of the gas and electricity supply system to meet the expected increase in demand have pulled prices back beyond their Christmas highs. Indeed, gas prices for delivery close to the present have risen to two year highs on the cold weather.

The expectations of cold weather for this period had been there since the end of the year. However, as the expected cold snap approached, forecasts indicated it could be deeper and longer than earlier thought. Furthermore, the conditions are expected to be even colder in Continental Europe. The resulting higher UK energy demand is price supportive in itself. However, colder weather in Europe also increases the cost for UK to import gas or electricity as Britain competes with Europe over the available supplies.

With UK storage stocks down sharply year-on-year due to the much-publicised problems at the Rough site, the UK has less flexibility to deal with cold snaps. This increases the dependency on imports. This is also being impacted by weak LNG deliveries. There remains only one cargo for delivery this month, with higher Asian energy prices encouraging LNG supplies to go East rather than towards Europe.

The higher gas prices are supporting the electricity market, but concerns over supply and demand are adding to this pressure. The cold weather is forecast to pull peak power demand up sharply towards highs for the season. At the same time, wind generation levels are expected to drop next week and National Grid are currently forecasting negative supply margins.

Snapshot Year-ahead Wholesale Prices 12 January 2017 Utilitywise
visit: www.utilitywise.com

Paul Anderson

Posted by on Thursday, the 12. January at 17.48

Paul Anderson joined Utilitywise in 2000 as a member of the Market Intelligence team. As a Senior Analyst, Paul is responsible for the production of bespoke strategic consultancy projects as well as developing analytical models. This has included a market-leading Triad forecasting model and a fully inclusive delivered energy pricing forecast tool. Paul has an Honours degree in Film and English from the University of Kent.