UK and Dutch Gas issues give mid-month boost to power prices

Thursday 20th April 2017

The increases in gas and power seen at the end of March started to reverse at the beginning of April with weaker gas and coal markets pushing sentiment lower. However, things have since returned to an uptrend, with gas issues relating to the large Groningen gas field the UK’s Rough gas storage facility dominating traders’ thoughts. Groningen production has been cut further by the Dutch government due to renewed fears over earthquakes set off by gas drilling. Rough gas storage injections have now been curtailed until April 2018, having been due to resume this June. Whilst any issues relating to Europe’s largest gas field and the UK’s largest storage facility are fundamental to price, it should be noted that costs have not spiked as much as may have been anticipated. Essentially, there has been so much bad news about Groningen and Rough in the last few years that a lot of the associated risk has already been factored into price.

The price of Brent Crude went back above $55 on news of Saudi willingness to extend the OPEC production cut. Prices dropped back significantly yesterday though, as US inventories remain robust – essentially an OPEC cut is counterbalanced by increased US production (viable at circa $50), so prices are thus fairly stable, with decreasing influence on the wider energy picture.

Renewables are set to play a significant role in UK energy requirement this summer – the every increasing solar array should reduce gas and conventional electricity generation demand.