Prices rebound from early December falls

Monday 19th December 2016

Powerful price drivers have dominated market movements in the first part of December. First of all, the decision by French nuclear regulators to allow some of the offline plant to restart by the end of December saw dramatic falls in power markets. This issue has dominated both gas and power since the start of October, so the prospect of renewed generation has been welcomed across Europe, with French January ’17 prices off a massive 21% and UK Q1 ’17 dropping 10%. Short-term prices have eased on generally mild weather and record wind output.

However, the bearish sentiment has since been hit by some more bullish factors: gas short-term has been affected by new problems at Rough (just when the positive influence of the storage facility reopening for extraction was helping ease things); Norwegian and Dutch production issues have helped the upturn; finally, most significantly, the OPEC oil production cut that was initially shrugged off by traders seems to be having more influence on the gas market (due to oil/gas price indexing) – it will be interesting to see if the cut commitment holds as certain exempt countries have already upped production, taking advantage of the more buoyant market price.

Will Bridge, Head of Procurement