Small Business Market Update
Wednesday 09 May 2018
What has happened to Gas prices this week?
UK Gas prices are showing no let-up in the upward movement being seen in the market currently. Another week closes in which gas prices has made significant gains across the curve.
Oil prices continue to remain firm priced above $75bbl for the majority of the previous week, holding at $78.92 at time of writing. Following Donald Trump’s decision to pull the US out of the Iranian Nuclear Deal, with the threat of sanctions on one of the largest exporters of Oil, there seems to be a bullish trend on the market. Prices of Oil continue to rise, despite US data showing that Oil Rigs are now at the highest level in history.
On Thursday 10th May, the Bank of England voted against raising Interest Rate, opting to keep the rate at 0.5% rather than to increase, which was largely against the market expectation. This led to a sharp fall in GBP to Euro making the UK Gas market relatively cheaper to those backed by Euro’s. With the extra buying demand, the UK prices increased.
Coal and European Carbon prices helped to provide further support, as the prices of both increased across the course of the week. Coal reached over $90 and European Carbon prices climbed back up to over €14.50 as a stronger fuels complex strengthens gas prices.
The European gas storage situation remains low compared with data for year on year and below 10-year averages due to the late winter cold, with most storage facilities well below expected levels at this time of year. May-18 has a large number of gas field and processing facility outages, which will inhibit the flow of gas to storage, helping to lift Winter-18 prices.
Over the course of the week, the UK has basked in warmer and generally calmer weather, leading to a reduced gas demand. Total demand has been at least 30mcm below seasonal norm on some days. The increase in renewable energy helped to reduce gas burn for electricity generation, but this only helped to prevent further gains.
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
Bearish Factors (Downward Pressure)
- Warm Weather
- Low Gas Demand
- High Renewable Generation