Energy Market Risk Analysis | Mid January 2017

Prices thrash on weather changes

It has been a volatile start to the year, with January beginning with a tumble, as the strong rally seen at the end of last year unraveled. By the 10th of the month prices were firming again as exceptionally cold weather hit eastern Europe and started heading westwards, stoking gas and power supply fears. However by the end of the second week of January mid-term and long-term levels were starting to come under pressure again, dragged lower by a softening gas market, although short-term UK power levels reared higher as two nuclear plants went offline and wind power output dropped.

European freeze lends support

The UK gas market, in line with many other energy markets, started January with a shunt lower, as the late 2016 rally exhausted itself, and an uptick in import volumes and physical supplies, coupled with forecasts of less cold weather, weighed on discussion. Prices then ramped higher as freezing weather hit central and eastern Europe, causing several regional energy shortages, amid predictions it would spread to northwest Europe. But as it became clear the UK would escape the worst of the weather, prices then started to ease again.

Energy price shift between 29 December 2016 and 17 January 2017

Elec: -2.63%

Gas: -0.72%

Coal: -5.34%

Oil: -1.37%

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