News Blog

23 Nov 2016 | Filed under: Energy Reports

Weekly Energy Report – Week Ended 18 November 2016

Summary

Over the week, prices recovered marginally after initially continuing to fall. However, the rational for movement was somewhat odd as gas ignored traditional fundamentals i.e. crude oil prices and ploughed its own furrow.

The beginning of the following week has been quiet with slight increases relating to another rumour that oil production might be cut.

Gas

In the early part of the week, prices fell across the board. Initially this was put down to a fall in crude prices, warmer weather and the strength of Sterling. This trend continued into Tuesday despite crude bouncing back. Perversely, on Wednesday gas bounced up despite a crash in oil. Apparently the rationale was a supply shortage. Thursday saw a return to fall in prices as coal and other fuel costs fell. Coal fell on the back of reduced demand from China and US coal stockpiles being greater than expected. The increase on Friday recovered the lost ground though the week though the rationale defied the usual logic as temperatures were up and oil down. In essence there was a system shortage in gas as flows from Norway declined.

Source: SSE Business Energy

Source: SSE Business Energy

Power

As ever coupled with gas, power also fell and was supported by strong wind and solar forecasts. The mid-week increase in power had a more tangible reason than for gas as jitters in France about a winter shortage of power meant the UK became a net importer helping France balance its system.

Source: Haven Power

Source: Haven Power

Outlook

The outlook is very unclear. Uncertainty about system margin in the UK seems to be reduced with the National Grid reducing its forecast capacity requirement. This should keep short term prices down.

There seems no real new news on oil production that can provide firm direction. Though once again, there seems optimism about a cut in production which will almost certainly drive prices up if it ever actually happens.

Bullish pressure is likely therefore to come from exchange rates and in the short term uncertainty of French supply and higher demand driven by a colder continental winter could drive prices back up again.

Hopefully April and October 18 contract starts will be relatively stable for the time being, with their continuing to be some value in longer term contracts from an energy perspective.

For further information, please contact Ravi Khakhria – ravi.khakhria@auditel.co.uk / 020 8866 6551

Comments are closed.