Energy Update for 8th May 2017
Last week, prices increased initially on the back of a reduction of imports of gas from Norway, some outages at the UK Nuclear Fleet, and the cold weather continuing to keep demand high. However, this was offset a little bit by a strong pound. As the week progressed, prices fell away, as supply increased with the Norwegian gas flows resuming and the Nuclear Fleet coming back on.
However, this in turn was offset by a weakening pound, which usually has a positive impact on prices. Overall, we probably saw the short-term price situation improving a little bit, but further out on the curve, and that depends on which report you read, prices fell away a little again.
Looking forward, it’s very difficult to anticipate what might happen. At the moment, all the fundamental and sentimental reasons for prices are competing with each other and cancelling each other out. No one factor being dominant and no combination of factors, which might push prices in one direction, taking control. So at the moment, we’re not seeing the volatility that we had expected at the turn of the year. In fact, prices are incredibly stable.
However, we should keep a weather eye on the next winter season. You will recall that the gas storage facility won’t be holding as much in reserve this winter, which means that the gas system margins will be quite tight, and that could contribute to volatility.
One final point of interest, resulting from the increased solar panel assets we have in the UK. While solar, obviously, generates very cheap units of energy during the daytime, when lighting up time comes, and it coincides with peak periods, then solar, obviously, can’t contribute and the system has to be balanced using expensive gas assets. Thereby, creating pricing peaks at those times.
If you have any questions about this report, or anything else that’s going on in the energy industry, or anything that might help your business improve its efficiency and profitability then, please contact Auditel for a no obligation Strategic Cost Review