Small Business Market Update
Tuesday 17 April 2018
What has happened to Gas prices today?
UK Gas prices have increased since last week overall, however a small period in which prices eased made sure that any gains have been reduced.
Gas prices increased between 9th April and 14th April with significant gains seen between 10th and 11th. A period of weakness at the end of Friday and through early trading on Monday have brought prices closer in line with the levels seen since the last Small Business Report was distributed last week.
On Monday 9th April, Oil prices stood at $67 per barrel, but global issues threatening supply and production sent prices soaring to $72. Growing political tension in the Middle East, the threat of US sanctions on Iran and slowing production in Venezuela following an economic crisis all weighed in on the price of Oil.
There has been a period of unplanned maintenance on parts of the European Gas infrastructure. Summer is usually the busiest schedule for planned periods of maintenance; however, an issue at Kollsnes in Norway was unexpected and has lasted longer than originally thought. This affected gas supply into the UK and restricted flows across Europe leading to increases on the prompt and May-18 contracts.
Gains in other energy and related commodities have helped pulled the price of the UK gas market upwards. Coal has climbed to above $82/tonne and EUA prices have soared above €14 making the energy complex more expensive.
Upcoming temperatures in the UK are expected to remain well above seasonal normal this week and into the weekend, significantly reducing gas-heating demand. The weather models have remained aligned and confidence of this leading to gas prices easing at the front of the curve as expectations of lower gas demand pressured the market. Today, Tuesday 17th April gas demand is at 189mcm, currently 52mcm below seasonal average.
Warmer weather is bearish for gas prices but also higher wind generation levels bring a typically weaker gas price on the front of the curve. Less gas is required to burn for electricity generation meaning demand reduces further. For once, in what seems forever, we may see some warm and particular calm weather heading into a weekend. Fingers crossed!
The GBP has strengthened recently and £1 currently exchanges for 1.1576 Euros. This is the strongest performance in nearly a year when the same value was achieved on 24th May 2017. A stronger pound makes traders backed by Sterling look to alternate markets where gas becomes relatively cheaper.
What specifically affected prices in the past week?
Bullish Factors (Upward Pressure)
- Strength in Oil Prices
- Unplanned Outage and Infrastructure Maintenance
- Strong Coal & European Emissions
Bearish Factors (Downward Pressure)
- Warmer Weather Forecasts
- Reduced Demand
- High Wind Generation
- Strong Sterling against Euro