Utilities Market Knowhow!

During the last month, the Oil price has fallen to levels last seen in November 2016 and at the time of this report being written is $46 barrel. During June, the Organisation of the Petroleum Exporting Countries (OPEC), increased output, due to some members being exempt from the cap, which lasts until March 2018. Some mention was made of further cuts by OPEC and Russia, but these appear to have been dismissed. 

Our largest Gas storage facility, Rough, which we have relied on to support higher demand levels through winters, had been due to be available again from April 2018, following a number of issues. In June, it was announced that Rough would remain permanently closed. Although this had a limited immediate impact on prices, the expectation is of volatility due to the inevitable demand increase heading into the winter. Some LNG deliveries are booked and we will be reliant on these continuing. We do have interconnectors piping in Gas, but as we have seen recently, these are prone to issues which could leave us with short supplies. 

The expectation is that during the summer, we will have too much generation with the large amounts of Solar and Wind available. However, there has been and will continue to be periods where the Renewable contribution is low and with planned Gas and Nuclear maintenance, there is an ongoing need for more expensive Coal generation. French Nuclear issues could also mean less imports over the next month. 

A higher global demand for Coal meant price increases, although China is restricting some imports which may relieve the pressure. 

What does this mean for me…

The Year Ahead Wholesale price graphs (see end of report) show little change on the previous month. For contracts which need to be closed within the next few months, it is worth considering contracting now, due to lack of price direction. 

Concern as to how prices will react to Rough not being available, potential delays or disruption to Gas deliveries and the annual worry as to whether there will be enough generation to meet demand through the winter, suggest it is worth considering all 2017 and early 2018 contracts.

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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