Changeable weather forecasts prompt oscillating wholesale movements

Tuesday 4th December 2018

Generally through the second half of November, we have seen declining gas and power markets. Weather forecasts have shown increased temperatures and demand predictions have thus been revised down. At the same time, the key driver of oil has gone to 12 month lows, with the Brent crude index dropping below $60 (having been above $85 at the beginning of October). Oil is down on the general build of inventories, particularly in the States. However, this has turned in recent days with an apparent truce in the trade war between China and the US giving a boost to the global economy, and the expectation that OPEC and Russia will prolong the production cuts seen through the course of 2018. The upturn in oil equates to a partial recovery in power and gas prices.

Other bullish pressures include another increase in EU carbon costs, a prolonged shutdown at Hunterston nuclear power station and issues with coal supply. However, weather forecasts seem to be the major driver at present.