And so it continued with the markets maintaining their recent downward trajectory, except with oil joining the party. Oil prices slumped on the back of America increasing their storage levels for the first time in 10 weeks. It was further compounded as US oil production topped 10 million barrels for the first time in decades and there was cause for concern across the markets about whether the OPEC cuts will be enough to remove the remaining glut.
As the US Dollar pulled back some of its losses, those commodities priced in dollars garnered less attention from the markets, which further pressured oil downwards. In Europe, the Dutch regulator announced that recent earthquakes there would reduce the permitted volumes from the large Groningen field and this caused gas prices to spike mid-week. Brent finished down 2.7%, ending the week at $68.58 a barrel.
The cold weather helped gas demand climb in the UK, but the system coped well again, with higher imports and flows through the Belgian inter-connector. With the cold snap expected to extend into mid-February, prices held firm in spite of the well supplied market - although this was tempered by strong renewal output earlier on in the week that helped minimise power station demand. With continuing good availability from the power stations, electricity prices kept pace with gas and the addition of strong wind output throughout most of the week kept generation demand low. Support from a returning nuclear plant added resilience to the market.
There were only limited falls in all contracts last week and with cooler weather forecasts in place for February, plus higher demand, prices should remain steadier for the time being. With the prices continuing to be so inextricably linked to weather patterns, and demand as a firm direction for other fuels is sought, we urge clients to continue monitoring markets closely and be ready to contract quickly, should the tariffs fit their budgets.