Energy Market Risk Analysis | Early August 2014

Russia sanctions fuel price spike

The shooting down of flight MH17 over eastern Ukraine and fears of an escalating breakdown in relations between Russia and the West in its wake have very much dominated global energy market  discussion since mid-July. UK gas and power markets have been no exception, first knee-jerking higher on the day the plane crashed, only to ease back and then witness a slower but more sustained surge a few days later as the West prepared to increase sanctions against Russia. As the new sanctions were announced, however, prices snapped lower ─ as no restrictions were put on the gas sector

 

Surge and slump on sanction fears

The combined effect of the shooting down of the Malaysian airliner in Ukraine and the ensuing fears over the West’s retaliatory sanctions against Russia drove UK gas prices for September and October up by almost 14% and prices for the coming Winter up by almost 5 p/th, or 8%. But while the new raft of sanctions, when they were announced, did target the oil sector (through banning the supply of some technological help) they side-stepped the gas sector entirely, immediately allaying some of the supply fears that had been building in the days before. Prices then slumped.

 

The previous market risk analysis for Late July


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Energy price shift between 20 July 2014 and 04 August 2014

Elec: +1.05%

Gas: +0.94%

Coal: +1.04%

Oil: -2.04%
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