Small Business Market Update
Tuesday 7 August 2018
What has happened to Gas prices this week?
UK gas prices increased from the previous week with a number of bullish fundamentals weighing in on the market.
Oil prices increased late on Friday 3rd August following threats by Iran that they would block the Strait of Hormuz, one of the busiest routes for Oil cargoes. Data published through the week also indicated a drop off in inventories at a US storage hub. Oil prices posted their first weekly gain since June on the back of this news, which helped to lift UK gas prices.
Weather continued to play a part in strong gas prices at the front of the curve with near term and short term contracts holding strong. Unplanned maintenance in Norway, led to a short UK system at the end of last week. With demand remaining high on the back of increased demand for gas across Europe, prices remain high.
Temperatures are set to cool down and become more unsettled this week, helping to both reduce the air conditioning demand across Europe and bring higher renewable energy generation. Longer-term forecasts are for more hot and dry weather until the end of the summer.
European storage levels have built up over the course of the summer period with Europe standing at approximately 60% full, and the UK just below at 59%. Last week storage facilities were net withdrawing due to the continued high demand, holding some risk premium in the market.
On Thursday the Bank of England hiked up Interest rates from 0.5% to 0.75% which was expected, however GBP had a poor performance for the remainder of the week making UK gas relatively cheaper for traders back by the Euro. Buying demand increases because of this, results in stronger UK gas prices. The GBP saw losses against most currencies as Mark Carney, Chairman of the Bank of England warned on a no deal Brexit.
What specifically affected prices in the past week?
Bullish factors (upward pressure)
- Oil Prices Up
- Coal Prices strengthen
- Carbon Emissions Climb
- European Gas Maintenance
- GBP Weakness – Interest Rate Decision
Bearish factors (downward pressure)
- Potential for Higher Renewable Generation
- Cooler Temperatures for the upcoming week