Power price rally turns downwards as May ends

Thursday 8th June 2017

Gas and power annuals rallied in the second half of May, although there was a partial correction at the end of the month. Gas and coal indices have been key drivers, rather than oil that increased then fell back in spite of the OPEC cut extension agreed on 25th May. Coal supply fears have increased due to Australian floods at a time when European demand for coal generation is potentially increasing this summer. This really demonstrates the global impact of energy fundamentals. Gas has been driven up by issues closer to home, with the Dutch government imposing further cuts at the Groningen field due to the ongoing earth tremor concerns.

Short-term prices have improved significantly in the last fortnight – whilst planned nuclear refuelling outages gave short-term gas a boost, record solar power production significantly reduced gas demand.

A key pointer for energy prices in the coming days should be the election result – Sterling has weakened versus the Euro as polls hint at the instability of a hung parliament – weaker sterling equates to costly gas imports as was the concern post Brexit vote.

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