Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Monthly energy markets update

UK power, along with other energy markets, continued to see prices gain in early July, helped by threats by striking Norwegian oil and gas workers to bring all Norwegian production to a halt. But the uptrend was quickly broken as the Norwegian government forced an end to the industrial action on July 10th, and production levels ramped up again.

Electricity markets update

Day-ahead prices, which had been pushed as high as £45.50 MW/h on the back of strike-related gas supply concerns, have since come down as low £42/MWh, while £2/MWh has also been knocked off August and September levels – bringing them to around £41.5 and £42/MWh respectively.

Although prices further forward also shed value – October ’12 Annual for example, losing £1/MWh – some future periods have started to curl higher again. October ’12 Annual has locked in on £47/MWh in recent days, but Annuals beyond this have been more bullish, with October ’14 Annual up £0.7/MWh

This has been on the back of strengthening oil and gas prices.  Oil prices have risen towards a 7-week high in anticipation of economic stimulus packages in the US and China, while future gas prices have also been lifted by economic recovery hopes tinged with reduced certainty over global shale gas supplies.     

Gas markets update

The gas markets were also affected by the strikes in Norway. The Norwegian government said that a concern that Norway’s credibility as a gas supplier would be badly damaged was the main reason behind their decision to end the strike.  

As soon as the strike ended prices across energy markets slipped – Day-ahead gas dropping by 4 p/th, and Annuals softening by 1 p/th, as oil prices also buckled.

But oil and longer term UK gas prices were soon rising again, buoyed by economic stimulus talk. Falling US oil inventory levels and further rumbles in Iran about blocking the Straits of Hormuz have also helped pushed oil up by almost $6/barrel since the strike ended.

The gains in longer term gas prices have been less remarkable.  October ’12 Annual has steadied around 60.9 p/th since the strike was called off, but all other Annuals have risen slightly, pushing the differential between them to its widest level since February. All Annuals from October ’14 Annual to April ’18 Annual are now valued back up around 62.7 p/th.    

Short-term prices have gained some bolster from summer maintenance programmes at several fields as well as a drop in LNG deliveries.

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