The second half of January saw the most prolonged and steep downturn in wholesale prices for several months. There was a definite bearish theme, prompted by mild, windy weather, and abundant physical supplies of gas. The decline in prices seemed to go counter to the direction of Brent crude oil, with that index hitting a new 3-year high in excess of $70 and various commentators suggesting $80 a barrel by the summer. Sterling strengthening significantly against the dollar and to a lesser extent versus the euro also gave the bears momentum. However, there has been an upturn in recent days, with much colder European forecasts and a drop in Atlantic winds bringing bullish pressure, as has further production cuts at the Dutch Groningen gas field, prompted by more drilling induced earthquakes. Nevertheless, at the time of writing, both power and gas Annuals have dropped again, with UK temperatures expected to pick up by the end of this week, oil coming off on news of record US output and a slump in coal prices on reduced Chinese demand.

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