Small Business Energy Market Update
Tuesday 18 September 2018
What has happened to Gas prices this week?
The UK gas market has seen losses over the recent week as a number of fundamentals driving the gains subsided.
Upcoming weather temperatures were revised upwards, with the UK expected to sit 4/5°C above seasonal average until the end of this week. The UK is expected to receive the tail end of Storm Helene as it disappears into the Atlantic bringing much windier weather. The combination of warmer and windier weather has reduced gas demand at the front of the curve.
The end of Norwegian maintenance brought an increased supply picture to the UK market this week. Norwegian flows had fallen as low as 14mcm over the course of the last few weeks, but following the return to action, the UK was receiving 45mcm from Norwegian facilities.
One of the most significant price increases driving the UK gas market recently was the increase in Carbon Emission EUA prices. The price of EUA’s fell from €25.17 to €18.50 last week on profit taking and rumours that an injection of credits may be pushed into the market boosting supply.
Over the last week, there has been some level of optimism brought into Brexit negotiations. The EU negotiator announced that he expected a Brexit deal to be agreed in the next 6-8 weeks, followed by some positive economic data releases in the UK economy. An improvement in GBP against the Euro helped to reduce prices at the back of the market.
Brent Crude prices have ticked upwards, which is one of the last fundamentals holding on to risk in the market. US data has shown draw down in inventories for the last 2 weeks and this morning Saudi Arabia released comments in the latest OPEC meeting that they are content with Oil prices climbing above $80bbl.
What specifically affected prices in the past week?
Bullish factors (upward pressure)
- Oil Prices Up
Bearish factors (downward pressure)
- Warmer Weather
- Lower Gas Demand
- Higher Renewable Generation
- End of Gas Infrastructure Maintenance
- GBP Strength