Small Business Energy Market Update
Tuesday 5th June 2018
What has happened to Gas prices this week?
UK Gas prices halted their recent gains last week, with a late fall in the mark towards the end of the working week.
UK temperatures sat well above seasonal average, with strong solar levels helping to reduce both the heating demand and increase renewable generation, allowing for a smaller demand in gas burn for electricity. The front of the curve saw the benefit of this as gas prices eased on Thursday and Friday. Prices did not fall as much as may have been expected as gas flows into the UK from Langeled had reduced from 35mcm to 22-25mcm on any given day. Yearly maintenance can be held accountable for the lower flows via this method.
Towards the end of the previous working week, the Carbon prices saw some losses. This helped to reduce prices on the far curve. This has since shifted, with EUA’s climbing back above €16 with some futures priced over €17. A strong Coal price continues to help support prices on the far curve.
Oil prices were the biggest price driver, pushing UK Gas prices down, as reports suggested the three largest producers of Oil were set to rise. Saudi Arabia, Russia and the USA would likely climb to meet concerns over rising demand. Prices were further pressured by an announcement that US output of the commodity has surged over 25% since 2016.
Political uncertainty in Italy last week ensured that the Pound strengthened against the Euro, helping to reduce gas prices in the UK market. A more expensive pound makes UK gas relatively more expensive to traders backed by Euro leading to less buying interest.
A further boost to the UK supply network arrived with the announcement of an LNG arrival on the 7th June.
Temperatures are set to remain fair for the upcoming week with a small dip to seasonal averages for Wednesday & Thursday but lower UK demand is expected. Solar radiation is expected to fall due to cloudier weather, but wind generation is forecast to remain strong.
What specifically affected prices in the past week?
Bullish factors (upward pressure)
- Coal Prices strengthen
- Carbon Emissions Climb
- European Gas Maintenance
Bearish factors (downward pressure)
- Warm Weather
- Low Gas Demand
- High Renewable Generation
- Oil Prices Fall