Innovative Energy Consultancy Ltd
Innovative Energy Consultancy Ltd

Power prices hit record low

Record low oil prices continued to drag UK gas and power contracts down in January.

Sharp falls in oil prices, which dipped below $30/bl in January, remained the primary driver of gas contracts throughout.
Summer 16 gas dropped 10.3% to average 29.3p/th.  Furthermore, a strong UK gas supply outlook provided additional pressure, with global LNG capacity forecast to rise significantly in the coming years. 
Seasonal power contracts followed gas prices down, with summer 16 power slipping 7.5% to average £33.1/MWh.   Seasonal gas power contracts are now at their lowest levels since 2007.
Spot gas and power prices experienced diverging trends in January.  The day-ahead gas contract fell 6.0% to average 32.1p/th, hitting a near six-year low of 28.8p/th on 26 January. 
Falls came as increased supplies more than offset higher demand levels.  In contrast, day-ahead power rose 9.0% to average £37.4/MWh, hitting a nine-month high of £48.4/MWh on 18 January. Prices climbed as lower wind output and colder temperatures tightened supply margins during the month.
Brent crude oil tumbled 18.5% to average $31.9/bl in January, hitting a 12-year low of $27.8/bl on 21 January.  Prices fell as the Chinese economy continued to slow and international sanctions on Iran were lifted.  Iran holds the fourth largest oil reserve in the world.
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