Utilities Market Knowhow!
We have seen further increases to the Gas and Electricity Year Ahead Wholesale prices, although they are still lower than most of 2015. The main driver for the increases has been the steady rise in the price of Oil, despite the OPEC meeting on the 2nd June agreeing to maintain production levels. Last month’s report showed prices were $45 a barrel, from $40 the month before. We are now seeing $50, which is an 8 month high.
A combination of factors is applying pressure. Non OPEC members reducing production, disruption to Nigeria’s output due to attacks on their infrastructure, the fires in Canada applied pressures to supply levels and also impacted on the slowly decreasing stockpiles of Oil in the US. Venezuela’s economic problems, unrest in Libya and thoughts of increases in demand, are all influencing prices up. There is obviously uncertainty about the impact of the Brexit referendum result on the 23rd June. A vote to remain may reduce or help to stabilise prices, whilst a vote to leave could add pressure, with concerns about longer term investment.
Gas prices have followed Oil. There has been some disruption to imports due to maintenance and an increasing demand on Gas for generation. 47% of Electricity was generated by Gas in May, so as the Gas price increases, so has the power.
There will be a further closure of a Coal fired generator in June due to the economics of supply. At times in June there was no Coal generation. Coal production closures are driving prices higher, but this may be a limited increase, as production levels may adjust to better market conditions.
What does this mean for me…
The Year Ahead Wholesale price graphs show increases for Gas and Electricity. For contracts which need to be closed or for customers who still wish to close at levels lower than 2015, there is still very good value in doing so now.
For 2016 / 2017 contracts where there is an opportunity to wait for a potential easing of prices, it may be worth closely monitoring prices. lpm, together with Indigo Swan, would be happy to research development communal supply options for 12, 24 and 36 month contracts, to determine the potential benefits these current low prices might mean for you.
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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