Wholesale Energy Prices Update 26/01/18

feefo logo Telca logo

UK forward annual gas and electricity pricing

Oil continued to plough its own furrow last week, compared with other energy indices, as sharp fluctuations in currency movements offset any gains made in oil.

It climbed to over $70 a barrel as continued drops in US storage volumes, and Venezuela’s ongoing political problems, gave an indication of a huge unplanned reduction in the country’s output.

In the UK, these tremors were offset somewhat by a weakening Dollar, caused predominantly by the Government shutdown and the US Treasury secretary’s comments. Oil (always priced in Dollars) became cheaper to UK buyers as Sterling recovered almost back to pre-Brexit levels, albeit a short-lived recovery.

There was further market support later in the week as European coal prices climbed due to rising demand in the Far East. Brent finished the week up by 2.7% to $70.50.

previous 12 months wholesale energy prices

Gas demand in the UK dropped far below normal throughout most of the week as the country felt the benefit of warmer temperatures. Higher winds also helped reduce power station demand. Additionally, the gas system was very well supplied with large imports from interconnectors. However, Friday saw a gradual slowdown in the price drop as forecasts indicated a a colder February and March beckoned.

The continuing high winds helped electricity prices track gas downward as wind output kept generator demand down – this was even despite nuclear outages further into the week. The rising value in coal stemmed the falls on Friday with the markets settling down in response. With the continuing disconnect with oil, the UK again focused on weather and demand with a high percentage of contracts witnessing big losses once more. The prompt year saw just over 2% on gas and electricity with just the 2020 electricity contract witnessing a rise.

Weather forecasts remain ‘inclement’ and change frequently. This, coupled with the disconnected oil market, give no hint of direction and therefore demand appears to be the main price driver. However, bear in mind that this can change quickly so UHL advice is to carry on closely monitoring markets and be ready to contract quickly should the opportunity present itself.