Energy Market Risk Analysis | Late September 2014

Ceasefire strain lifts levels

While there was some price softening on UK gas and power markets following the announcement of a formal ceasefire between Ukraine and separatist rebels in the east of the country on September 5th, levels have started to rise again over the last few days as outbreaks of violence there have made the ceasefire look fragile. Interrupted flows of Russian gas into eastern Europe have also fuelled concern over gas supplies. UK power prices have at the same time been shored up by growing concern about electricity supplies this winter, following the spate of recent unscheduled outages. The tone has remained bullish despite falls – some sharp – in oil, coal, emissions and European electricity prices.

 

Russian gas reductions stoke fears

Although the “ceasefire process” announced at the start of September quickly hardened into a formal ceasefire between the Ukraine government and separatists, this has failed to reassure gas market participants about gas supplies from Russia this winter, and prices have since risen rather than fallen on most periods.

There are several reasons for this: fighting has continued in parts of eastern Ukraine, the EU – despite a small delay – has still proceeded to impose new sanctions on Russia, and Russian gas flows to four eastern European countries – Poland, Romania, Slovakia and Austria have witnessed partial disruptions, amid claims of game playing by Moscow and that it is a warning to countries not to forward Russian gas on into Ukraine (which Poland has been doing). Russia says the dip is just temporary while it fills its own storage facilities.

 

The previous market risk analysis for Early September


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Energy price shift between 04 September 2014 and 16 September 2014

Elec: +0.43%

Gas: +0.61%

Coal: -2.21%

Oil: -5.02%
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