Utilities Market Knowhow!

In April we saw increases for both Gas and Electricity Year Ahead Wholesale prices on recent months. However, putting these into perspective, they are still considerably less than 2012 – 15.

There were a number of factors which contributed to increases, in what was an eventful month, although the fundamentals are now once again largely the same as they were in March. This demonstrates a high degree of sentiment built into costs, such as concerns about the supply / demand balance and the outcome of Brexit. 

An OPEC / Russian meeting held in April failed to agree on an Oil price freeze as Iran wishes to regain lost market share and continues to increase output. Other members of OPEC are likely to follow.

There has been a reduction in non OPEC production as producers are feeling the hardship from lower revenues. It is expected that the Oil supply / demand balance may start to align in the second half of 2016, so with this news and the fires in Canada restricting their output, the average price is now in the region of $45, from $40 a month ago.

A combination of issues pressured Gas higher. The Oil price increase, below seasonal norm temperatures in April, some disruption to imports from the continent and storage facility issues.

Electricity also increased with Gas despite healthy fundamentals, as Gas now accounts for almost 50% of our generation.  

Coal prices saw further gains as production levels decreased as a result of mine closures and bankruptcies, which have resulted from the slower growth of economies and a move away from Coal’s use due to environmental pressures.

The decision regarding Hinkley Point C has been further delayed and as a result, EDF executives have been summoned to parliament to be questioned.

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 and be ready to react to market movement.

lpm, together with Indigo Swan, would be happy to research development communal supply options for 12, 24and 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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Deacon is a trading name of Arthur J. Gallagher Insurance Brokers Limited which is authorised and regulated by the Financial Conduct Authority. Registered Office: Spectrum Building 7th Floor, 55 Blysthwood Street, Glasgow, G2 7AT.Registered in Scotland. Company Number: SC108909.