Energy Market Risk Analysis | Mid December 2014

Weak all-round: on oil, restarts, wind

UK Power prices across the coming months, quarters, seasons and years have all reached long-term lows in the first half of December, pressured by a further slump in oil, gas and coal prices, and the planned return of power plant capacity that has been offline for some time for repairs.

April ‘15 Annual, the bellwether period for many end-users, has seen prices slip to almost £49/MWh – the lowest value for a front Annual at this time of year since 2011, while October ‘15 Annual has hit its lowest level since it started being discussed (two years ago).


Oil crash drives Annuals to new lows

A further slump in the oil price, which is used as a price index in 40% of upstream long-term gas supply contracts in Europe, has helped to push UK gas forward prices lower, while shorter term prices have been pressured by improved import flows in the face of temperatures generally remaining above seasonal norms.

The resumption of gas deliveries to Ukraine, after a six-month break, has also injected some slight bearishness into the market. Although the flows were agreed as part of the interim supply deal hammered out in October, the actual physical resumption of flows has alleviated concerns about Ukraine needing to source gas from western Europe this winter.


The previous market risk analysis for Early December

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