The markets made a significant recovery last week on the back of the icy cold weather hitting Europe and the UK. The cold snap spiked European energy prices and coal and oil got in on the act too, enabling them to recoup part of their recent losses. Oil was boosted because of the weakening Dollar, helped by OPEC continuing their line about cutting inventories. An unexpected drop in US inventories also helped oil’s jump, despite American production levels keeping above 10 million barrels. Coal prices jumped sharply in anticipation of the cold snap. Brent finished up 3.8% at $67.31 a barrel.
Recovering UK oil prices and the icy forecasts for the last week of Feb / beginning of March sent prices up, despite a well supplied system. The first LNG tanker since December arrived, which helped steady nerves but, earlier in the week, low renewables output kept gas power station demand high. This did however ease as wind power output picked up later in the week. The electricity system was well supplied, however this didn’t prevent prices following gas upwards, with additional help from coal.
There were significant increases on all contracts last week with the advent of the icy weather, with the shortest contracts rising the most. It looks like the cold will carry on into March so we expect prices to remain higher, certainly in the short term. Therefore we expect anyone who hasn’t yet contracted for an April start won’t see much of a drop in prices, at least until the forecast improves.
At home, the ‘Beast From The East’ dominated with headlines proclaiming insufficient gas supplies, which inevitably causing a huge spike in delivery prices for both gas and electricity. In fact, the issues were actually caused by temporary outages at the North sea gas facilities, plus issues around inter-connectors with Belgium and Holland rather than the gas system struggling, as the tabloids reported. The system was temporarily short but was aided by the high wind output reducing demand on power stations. Electricity kept pace with gas throughout the week with the aforementioned outages also adding initial pressure on the prices.