Utilities Market Knowhow!

There has been a great deal of activity both at home and abroad which has influenced Gas and Electricity prices, moving them higher. 

The Oil price has increased from $52 in last month’s report to $53, continuing the gradual upward trend. The amount of Oil that the US has in storage heavily impacts on price direction and there have been declines in their inventory. The disruption to Oil facilities due to Hurricane Harvey did initially move prices lower as there was less demand from refineries, but these have since become operational. Political tension between North Korea and the US also added value to Oil, as has disruption to supplies and production restrictions in the Middle East.

The potential for a lower Gas price this summer did not materialise. It was hoped that as we would not need to import Gas into Rough storage due to its closure, there would be a surplus through the summer, resulting in lower costs. However, with Oil going up and directly impacting on Gas, a series of unplanned maintenance disruptions, a lower £ and no LNG deliveries for a month, prices have been volatile.

Electricity prices have also been pressured by a number of factors. As mentioned above, Gas is up and this accounted for 40% of generation in August. The same can be said for the 3% contribution of Coal, where supply disruptions and a high demand from Asia pushed prices to a three year high. There was worrying news from France with concerns over Nuclear availability and safety concerns which may impact on our current 6% Imports. With such tight supply margins forecast over the next month, any reductions at this time could have an exaggerated effect.

Brexit negotiations are reported daily with differing views on how these are progressing, but the markets are not reflecting a positive position with the £ losing value against the € throughout August, making fuel imports more expensive.

What does this mean for me…

The Year Ahead Wholesale price graphs (see end of report) show a large increase on the previous month. Below average temperatures are expected in September increasing Gas demand and with few deliveries of LNG and no Rough storage, this upward trend may continue through the autumn and winter. For these reasons, it is advisable to put contracts in place for 2017 and early 2018.

It has been increasingly noticeable what the impact is on Electricity contracts with higher third-party costs, including, Transportation, Distribution and government policy levies, which look to ensure we have generation available this winter and support Renewables.

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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