Weekly Energy Report – Week Ended 6 January 2017
Prices fell across the board with a small rally during the middle of the week.
This week, energy prices largely ignored oil which, in general increased as the promised production decreases begin to be seen lead by Saudi Arabia.
The main factor for a price falls during the week was an over-supply that left the gas system long. This direction was supported in the early part of the week by a strong Sterling.
Gas prices rallied in the middle of the week as Sterling weakened and the possibility that there will be a production cut at the Dutch Groningen field – a request is being made to cut production completely due to fear about seismic activity in the area. The field supplies half of Dutch demand as well as exporting to Europe.
The market fell again a little towards the end of the week as the system moved back into over-supply.
Power generally followed gas. A decrease in forecast renewables mid-week supported a small rise.
With a relatively warm January and February being forecast, we might expect prices in the near curve to be subdued. This is also subject to currency impacts.
On the mid curve, a key factor may be the impact of an anticipated increase in global LNG. As prices have increased, we might expect US Shale oil to start to increase output and, if oil prices continue in this direction then we might expect this to continue. Therefore, in this instance an increase in LNG may help keep prices down in the UK if LNG finds its way to our ports.
Last year, a lot of LNG was taken up by South East Asia against predicted trends. Industry commentators seem to feel that this will not be as much the case in 2017 and therefore freeing up fuel for Europe. This should help keep price down for the mid curve.
Today, prices have shown a recovery despite a long system and a drop in oil prices due to a re-forecast for a cooler end of January.
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