Weekly Energy Market Update 27/1/17
Price drivers and outlookThe first full week of a Donald Trump presidency brought no major energy market news or movements. Figures showed that OPEC production did indeed decline as part of the cartel’s global agreement, but there are signs that the market is still waiting to see the policy’s overall effect. With US shale production on the increase and Libya’s output running normally, large portions of the OPEC cuts may be cancelled out. Trump has already had an impact on the market, signalling that he will make oil exploration easier in the US. Oil prices again traded in a band as further rises were seen in US oil storage levels. The pound rose as new President Trump’s announcements weakened the dollar. Brent closed the week almost unchanged at $55.52 a barrel.
UK Energy MarketGas and electricity prices acted according to what traders like to call ‘market fundamentals.’ Without any direction from the price of oil, gas and electricity rose and fell with market context. The gas system was long for long periods of the week, and above average temperatures forecasted next month pulled prices down. Electricity prices also fell – tracking down with the price of coal – falling on milder forecasts and higher renewable output predicted this week. All contracts fell by between two and four per cent in a week with no upward price pressure, no oil movement and warmer forecasts. As winter draws into its final stages, the potential for a prolonged cold winter is falling and this may dampen prices further still. It may be tempting to wait and see where the market goes. But risk hangs low over the UK – especially with President Tump seemingly willing to change US energy policy at the drop of a hat. Energy buyers should expect more volatility in future.
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