Utilities Market Knowhow!

There was relative stability through January with Year Ahead Wholesale Gas and Electricity costs almost unchanged from last month's report. The factors influencing prices remain the same. With some of these being short term, this provides optimism for future costs.

Oil has remained stable in the region of $55 barrel. This follows the initial increases when the Organisation of the Petroleum Exporting Countries (OPEC) announced their production cuts for 2017. Data on the effectiveness of the cuts through January is somewhat confused, with most OPEC members reducing output, whilst others have increased. Russia has stated they have also reduced output, whilst US production gains strength.

The stability of Oil meant there was no further pressure on linked Gas costs. Low storage levels remain an issue due to Rough (our largest Gas storage facility) being unable to import since summer 2016. There have also been restrictions on withdrawals, an issue which has been extended once again until 1 st March. The loss of this valuable source of supply continues to be built into costs.

Electricity’s main source of generation is Gas, so there was also little additional pressure on prices. Our imports of Electricity from Europe were down to just 2% due to France’s Nuclear issues. This shortfall was met by an increase in Coal generation, not just here, but across Europe.

Coal prices also remained stable in January in comparison to 2016’s increases. The recent additional demand from Europe may still be supporting prices, but longer term there is a potential for reductions, which will feed through into Electricity generation costs.

Brexit plans appear to be on track following the Supreme Court’s ruling and the subsequent approval by Parliament. This meant that the £ was virtually unchanged, although its value is still far below pre referendum levels, making our imports more expensive.

What does this mean for me…

The Year Ahead Wholesale price graphs show little change for Gas and Electricity.

For contracts which need to be closed soon, it is worth considering contracting now, due to potential volatility, with cold spells ahead. 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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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.