Energy Market Risk Analysis| Mid August 2016

On the rebound

UK power Annuals jolted lower in the first week of August by as much as 3.5%, on the back of a gas market sell-off, but by the middle of the month they had curled higher to recover almost all the value that had been lost. A rebound in oil prices and concerns over generation capacity margins going into the winter have supplied the upwards pressure over the last few days, pushing October ’16 Annual and April ’17 Annual back up to £43/MWh and £41.6/MWh respectively, outpacing gains on the gas market.

Short-term plunges by 15%

Short-term UK gas prices have plunged by as much as 15% since the start of August, on improved supply and weaker demand, while slightly greater losses have been seen in short-term prices in Continental Europe, pushing them towards six-year lows. At the same time longer term UK prices have started to rebound from an early August sell-off, a powerful oil rally helping offset bearish expectations that global LNG supplies are set to ramp up over the winter.

Energy price shift between 31 July 2016 and 16 August 2016

Elec: -0.68%

Gas: -1.58%

Coal: -4.03%

Oil: +12.38%

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