Energy Update for 7th March 2017
This week has seen energy prices falling again, continuing the trend, which began around about January time.
Increases in delivery of LNG, higher wind generation all supported the falling prices, alongside the decreasing demand due to the warmer weather. There was a slight rally in the middle of the week on the back of reports that Europe might be considering a carbon floor. That would impact coal fired generation and would support gas fired generation, all in all creating a slightly more bullish market for short term, but eventually the fundamentals reasserted themselves, resulting in the continued easements of prices.
One trend that has continued has been the reduction in the differential between short-term and longer-term prices, reducing the amount of backwardation there is in the energy price curves. Looking forward in the short term, there seems no reason to believe that any fundamentals will result in a major increase in prices.
However, of course, Brexit descriptions and its impact on currency exchange rates could well have that impact if it all goes in the wrong direction.
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