Utilities Market Knowhow!
Gas and Electricity Year Ahead Wholesale prices declined through November and into December with large losses, in particular for this winter. There were key factors which contributed to the decreases, but to a large extent, these were down to the industry having more confidence in our ability to get through the winter without substantial supply issues.
OPEC met on the 30th November and have agreed what looks like restrictions to output. This had an immediate impact on Oil prices, which had been in the region of $46 barrel, but have since risen to $55, as non OPEC countries also appear to be supporting restrictions in order to inflate the cost of oil. It would normally be expected for the upward movement of Oil to immediately impact on Gas prices.
However, Gas continued to decline with confidence in global and domestic supplies, especially as it was announced that Rough, our largest Gas storage facility, would be available for withdrawals in December.
There is still concern regarding a large proportion of France’s Nuclear generation being offline, which has meant that Coal generation has had to increase to meet the demand through Europe. This also means that where in November 2015 we had 4% of our generation mix from France in November 2016 this was just 1%.
The additional demand for Coal generation pushed prices up sharply in November, although they have since fallen, with the anticipation that China will allow more Coal mining, rather than increasing imports. Our own winter Electricity demand has also meant that Coal generation reached 12%, the highest since March 16, but still substantially lower than previous years.
National Grid remains optimistic about both Gas and Electricity supplies through the colder months.
What does this mean for me…
The Year Ahead Wholesale price graphs (see end of report) show decreases for Gas and Electricity. For contracts which need to be closed soon, it is worth considering contracting now, due to potential volatility, in particular, for further Oil increases and the pressure this puts on Gas and then Electricity.
There is still uncertainty as to which direction prices will go, so for the more risk averse, early 2017 contracts should be considered and closely monitor those further out.
Should you require further information, contact your lpm Estates Manager now.
Life Property Management work closely with utilities broker Indigo Swan, to bring the best energy rates to their clients. Indigo Swan’s Market Knowhow is a regular, comprehensive report on the position of the Utilities Market.
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