Weekly Energy Market Review – 09 February 2017

Weekly Energy Market Review – 09 February 2017

Year-ahead gas and power prices have eased back from last week’s highs following changes in weather forecasts.

Year-ahead gas and power prices have eased back from last week’s highs following changes in weather forecasts. However, they remain within the range they have traded in so far this year. Temperatures for next week and the rest of February have been revised up. Below seasonal-normal conditions are still expected in the next few days, but the length of the cold snap has been reduced. This has taken some of the support from prices, as there had been concerns over flexibility in of supplies during the cold weather.

The price movements have been most evident on gas and power for delivery over the rest of this winter. This is due to the driver being weather related. The revised temperatures and related drop in energy demand suggest there will be less of a call on both storage and LNG reserves. Rough and medium-range storage stocks are down on their position at the start of the year. There remain concerns over the long-term availability of Rough. Further tests are required on the UK’s largest gas storage site. This could affect how much gas can be injected over the summer and the volume of gas available next winter. Meanwhile, LNG supplies remain weak, with only one cargo in January and just two for February booked so far. One of these is the first UK delivery from Peru. However, the large premium Asian prices had held – which was a factor pulling available supplies away from Europe – has disappeared. This is raising expectations that the UK could see more LNG deliveries in the near-future.

Power prices have remained closely correlated to the gas market. This has mitigated the impact of generally healthy supply margins. Power demand has risen, and while wind levels have eased, the supply system has not struggled. With milder weather now expected in the near-term, the resulting drop in demand from this and the longer daylight hours should improve the system even further. The results of the 2017/18 Capacity Market auction indicate there should be more than sufficient supplies at hand to meet demand next winter as well.

Snapshot Year-ahead Wholesale Prices 9 February 2017 Utilitywise

Paul Anderson

Posted by on Thursday, the 9. February at 16.18

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.