It has been an unusual fortnight compared to much of this year as there has been more of a sense of sustained bearishness creeping in. Numerous factors have kept the markets extremely volatile, but overall, the drivers have been downwards.

Day-ahead gas was off 18% at one point, as the effects of storm Callum hit. Not only did the storm aide wind generation, it was remarkably mild (with weather hitting the mid-20s in the South East), so domestic heating demand fell away. The effect of cheaper gas was evident in Annual gas and power indices, in spite of other drivers – oil and coal – being up.

Winter ’18 is looking healthier than ’17 in terms of spare electricity generation margin, according to National Grid. Gas storage is still down on previous years, but Grid predicts gas generation demand will also be down due to increased renewables and coal in the mix. It may well be therefore that some of the risk built into current contracts (due to the Beast effect) may well have been excessive.

Other drivers remain – the US-China trade war is still bubbling in the background, and the Saudi journalist disappearance has heightened fears over US threats and Saudi countermeasures relating to oil.

Back