Wholesale prices have been in decline for the majority of the last fortnight. This is in spite of price pressures associated with the cold weather, with the UK experiencing the lowest temperatures of the season. In contrast to last winter, the cold spell has been accompanied by strong physical supplies – there have been few North Sea outages and LNG shipments are regular. The short-term bearish sentiment is also reflected in the April ’19 Annuals, with prices slipping below October ’19 Annuals after a prolonged period of backwardation.

The oil price has continued to recover, which has offered some momentum to future Annuals. There are signs that the OPEC / Saudi-led production cut is strengthening prices, and there is of course uncertainty about the situation in Venezuela. Whilst the economic crisis in Venezuela has meant that oil production has been down for several years, the country actually has the world’s largest proven oil reserves, so political uncertainty there can potentially have an effect on fundamentals.

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