Energy Market Risk Analysis | Early September 2014

Prices yo-yo on Ukraine and wind

The ebb and flow of tensions surrounding Ukraine has led to more volatility on UK power and gas markets over the last fortnight, with all periods first slumping in the third week of August as the crisis slipped out of the headlines before bouncing back by the end of the month as war rhetoric crescendoed, and then easing before dropping back further again today as a “ceasefire” was announced by the Ukrainians. A sharp drop in wind power output also contributed to short-term UK electricity prices slamming to a five-month high as September started, after an August which saw several wind output records broken.

 

Day-ahead roars to 4.5-month high

With Ukraine saying it was on the brink of all-out war with Russia, Russia continuing to deny involvement in the military conflict in eastern Ukraine – but President Putin letting it be known that he could take Kiev in two weeks, and the EU preparing a set of tougher sanctions on Russia, regional political tensions ─ and gas prices ─ again ratcheted higher at the end of August. But as September got underway, prices started chipping lower again ahead of new talks to settle the gas supply dispute between the two countries and as improved Norwegian import volumes applied some pressure to short-term prices. The announcement of a “ceasefire” in eastern Ukraine, subsequently revised to a “ceasefire mechanism” at the time of writing, then pushed prices lower again, although not hugely ─ October and Winter ’14 knee-jerked down by up to 1.8 p/th initially ─ only to grab back most of this lost value soon after.

 

The previous market risk analysis for Late August


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Energy price shift between 14 August 2014 and 04 September 2014

Elec: -0.57%

Gas: -1.73%

Coal: -1.4%

Oil: -1.45%
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