Utilities Market Knowhow!
Gas and Electricity Year Ahead Wholesale prices have fallen further from those in last month’s report. The outlook is generally positive, but there are some factors which could still push prices higher.
The Organisation of the Petroleum Exporting Countries (OPEC), saw good compliance to their Oil production cuts between January and March 2017. However, there was a realisation that the cuts were not too significant, as they were benchmarked against high production levels and the US are increasing their output, with good storage levels. These two factors caused a large fall in prices in early March, which has since been reversed, as OPEC look to extend the cuts for the rest of 2017.
The air strikes in Syria added pressure to prices, due to the sensitive region, rather than the impact on specific supplies.
Coal prices lacked real direction, as China may look to cut production to support prices, whilst the US are signalling a desire to increase output.
We are still unable to inject Gas into Rough (our largest Gas storage facility) and had limited access to withdraw through winter 2016 / 17, which was a concern built into prices. The current low storage levels are similar to previous years, but we are not able to begin refilling this until at least the 1st July. This means we should have more Gas to consume through early summer (reducing prices) but potentially less in storage for the winter (increasing prices).
Electricity prices decreased as generation costs fell, with Gas being cheaper and less of a need for Coal, which is a more expensive form of supply. Imports from Europe returned to normal levels following disruptions, with Wind and especially Solar, continuing to play important roles, as we head into the summer.
On the 29th March, we formally triggered the process to leave the European Union. This had a limited impact, as concerns were already built into prices. The weakness of the £ increases our cost to import, a contributing factor since the referendum.
What does this mean for me…
The Year Ahead Wholesale price graphs show decreases for Gas and Electricity. For contracts which need to be closed within the next few months, it is worth considering contracting now with the improved value. Although we are reporting lower prices, there were periods of increases, tracking Oil due to the links with Gas.
Contracts further out in 2017 are still worth looking at, to take advantage of lower prices or possibly track closely. The outlook is looking more positive, but there is still uncertainty as to which direction prices will go.
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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