Both gas and power markets saw a bullish upturn in the last fortnight of 2016. This was predominantly driven by problems in the gas market – low LNG deliveries, Rough storage withdrawal limitations and UK and Norwegian outages – combining with colder European weather forecasts for January 2017. At the same time, it became apparent that the bearish effects associated with the French nuclear all-clear were at an end. There has also been the driver of crude oil, with the effect of OPEC production cuts starting and also that commodity being priced in dollars, when the dollar has hit 10-year highs against several currencies.

Other key commodities were up for the end of the year, with coal shading $70/tonne on strong Chinese demand. European carbon emissions trading also saw increases.

With the first day’s trading yesterday, so some correction came and both power and gas have turned down, following a degree of profit taking by oil traders.  

With milder forecasts now posted for the next fortnight, it will be interesting to see if this will have the opposite effect on energy indices. It could also be the case that such an LNG-driven spike as just seen will be less common moving forward as US global exports increase in the coming year.

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