Wholesale Energy Prices Update 25/01/2019
UK Business Gas Prices Fall in WinterIn the UK, demand for gas hit its winter peak so far, but supply from the North Sea and LNG coped well and there was no need for supplementary supply from European interconnectors. Reasonable wind output kept electricity supplies healthy. Britain’s imminent commissioning of the new 1,000 MW NEMO interconnector with Belgium will make it easier to share energy with Europe and should shore up supplies in the future. The price of carbon also fell. This was aided by Germany’s announcement that it would quit coal generation by 2038 at the latest. All contracts fell sharply last week. The cold snap had little impact on supplies and oil and carbon prices both put downward pressure on prices. Weather is currently the key driver of prices. And with temperatures forecast to return to their seasonal norms, the risk of a particularly frosty winter is decreasing. The situation surrounding Brexit remains tentative. Although the pound increased in value last week, it could just as easily fall if negotiations hit a stalemate. With prices falling, risk averse clients may not want to take the wait and see approach. But those with a bigger appetite for risk may find that prices descend further on mild weather and supply stability.
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