Small Business Energy Market Update
Tuesday 12 June 2018
What has happened to Gas prices this week?
UK gas prices remained relatively flat for the week commencing 4th June and up until today. The market continues to trade with volatility but overall there has been no real price change in the last 7 days.
Oil prices came under pressure, falling from ~$78.50 to $73 as data published put US Oil production at record highs of 10.8million barrels a day, with the US oil and gas rig count climbing to 4-year highs. The Non-OPEC member Russia has increased production of Oil, which helped to weaken the price. To highlight the volatility of Oil, today the market has risen over $1 as supply disruptions surfaced following US sanction on Iran and the Venezuelan economic crisis.
The GBP strengthened throughout the week following poor data from the European Union and uncertainty in the Italian government. This has been resolved and poor data released by the UK on Monday meant the currency lost value. The GBP lost 1cent against the euro on Monday morning as trade deficit figures worsened, from -£3.52billion to -£5.25billion. A weaker sterling means a relatively more expensive gas price at the back of the curve.
The UK continues to bask in a warm weather pattern meaning gas consumption, especially in domestic properties has remained low. Total supply in the UK has been below seasonal averages since 29th May, highlighting the weakness on the prompt. One factor keeping some strength on the near curve has been a low wind and renewable output. Gas is required to burn to generate electricity and the low wind generation has ensured gas has been sought after for this purpose.
The IUK interconnector pipeline, which flows both directions from UK to Belgium, is offline from Wednesday 13th June until 28th June, meaning the UK will be unable to send or receive gas from Europe.
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
- Weaker Oil Prices
- Low Gas Demand
- Strong Pound Performance