Energy Market Report for 13/01/12

Prices for both electricity and gas rose slightly during week-ending 13 January 2012.  Electricity prices are their lowest since November 2010 and gas since February last year.

Main drivers

Prices rose sharply at the start of the week, following forecasts of a sharp drop in UK temperatures. However, prices then drifted back downwards throughout the rest of the week, driven by:

• View that markets over-reacted at the start of the week
• Softer continental power prices
• Weak oil price
• Falling demand
• High gas storage levels
• Weak euro.

Outlook

• Despite the current cold weather, the system has coped comfortably with increased demand with warmer weather now forecast, gas storage levels remaining high, and ongoing concerns about the Eurozone
• Continued tension in the Middle East could, however, quickly affect this position, with 25% of the world’s LNG supply passing through the Straits of Hormuz, and with Qatari LNG supplies accounting for 21% of the UK’s gas consumption in 2011
• Nevertheless, the risk of total disruption to this supply is considered low, and there are currently adequate alternative supplies available from Norway and the Netherlands.
   

Prices are consequently expected to continue to fall in the short-term, and clients are advised to continue to monitor the situation and be prepared to react should prices start to climb quickly.

If you have any queries about energy procurement or wish to know how the current energy prices may affect your business, please contact us on 029 2002 2888 or email info@uesenergy.co.uk