Weekly Energy Report – Week Ended 13 January 2017
Prices rose through the week and ended up across all products in power and gas, though there were signs of easement at the end of the week.
The anticipated cold spell at the end of the previous week drove price up in the short term despite the system margin being long and oil prices falling. This direction was supported in part by a weak pound.
The system remained long all week and prices only started to fall on Thursday as oil prices perversely started to rise. The rationale for this was predominantly a strengthening pound.
Like gas, fundamentals were largely ignored with prompt prices increasing despite a strong renewable input form wind early on. There is some upward pressure on short term electricity prices due to the poor wind forecast, however, the overall picture is declining prices.
Given the market’s tendency to be driven by weather forecasts we might expect short term prices to remain relatively stable on the basis of benign temperature forecasts for the next few weeks.
Trading activity further out on the curve seems to be conservative and therefore supporting lower prices further out as short term volatility pushes prices up at the front of the curve.
As ever the endless speculation about whether oil production will be curbed will create opportunities for traders to play the market and therefore impact energy. Currently caps seem to be held to, though the US and Iraq has been increasing output to lessen the impact of such reductions.
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