Energy Update for 23rd January 2017
This week, after an initial decrease in prices on Monday, energy prices rose gently. There was a slight decoupling between gas and electricity. One of the key factors this week was the low output from wind generation. When wind generation is lower, then there’s increased reliance on gas, which is a more expensive fuel. This was supported by an increase in demand as temperatures feel as the week progressed.
The increases were supported by outages at the gas storage facility, and the pound in general also weakened despite a rally on Tuesday after the prime minister’s speech. Power prices didn’t respond as positively as gas prices during the week. This may have been due to a weak French power market, which filtered through into the electricity prices.
Looking forward, the expected warmer February should help keep prices down. However, there are no scheduled delivers of LNG ships into the UK in the near future, which could put pressure on the system. And, of course, oil prices could play their part.
At the moment there’s a conflict between whether Saudi Arabia will reduce their output as expected, or whether the US will increase shale gas output, also as expected, the two factors competing against each other.
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