A cap on oil production – what are the ramifications?
After months of volatility in energy prices driven (we are told) by speculation that oil production might be capped, it has finally happened.
The consequence – oil prices soaring and energy prices…..doing very little…!
The main explanation for this has been the strength of the £. However after all the hype the impact seems way below what could have been anticipated. It goes to show how fickle and unpredictable the energy market is.
This past few months has seen some remarkable spikes based on fears around UK gas storage and French nuclear fleet capabilities, however the National Grid is reporting healthy capacity margins for the winter ahead suggesting that these fears were over exaggerated.
It also shows the power of market speculation as a market maker compared to actual fundamentals, the impact exchange rates being another prime example.
Auditel will continue to monitor trends and it still seems prudent to expect that if oil prices continue to rise it can only have a positive impact on energy prices when other factors subside.