Travel and energy demand fall due to coronavirus
Wednesday 5th February 2020
The bearishness across energy markets shows little sign of slowing as we enter February. Annual power prices are at their lowest levels since May 2016, with various factors exerting negative pressure. As previously discussed, European gas storage levels remain well above normal for this time of the year. With strong LNG deliveries and a continuing mild winter, gas prices are extremely weak and this has the obvious knock-on to power.
Another contributory factor in the downturn of wholesale is the outbreak of the coronavirus in China. This will potentially slow trade and thus global energy demand; an immediate effect of the virus was the travel ban on the Chinese New Year weekend, helping push crude oil below 12-month lows.
After the cold snap this week, weather forecasts revert to above average and energy demand should remain below seasonal norms; an immediate price recovery therefore seems unlikely.