Instability in the Wholesale Energy Market

Variable weather in Europe and uncertainty surrounding new fracking techniques leads to fluctuating prices in the wholesale energy market.

Falling temperatures across England and the UK at the start of January led to an increase in demand causing prices to rise. Predictable and typical for the time of year? Well yes, but thanks to the newly developed fracking process we are now seeing a surplus of stored gas. And although there is currently a high level of storage, suppliers have chosen not to implement production cuts. However, several companies including Chesapeake, BG Group, ConocoPhillips, Royal Dutch Shell and Statoil have announced their intention to scale down gas production.

As a result of this high supply and continued production at a time when demand is also traditionally high, the market has found itself in an unusual situation during recent months leading to indecision on prices. Wholesale prices fell to their lowest point in almost six months in mid-January 2012 but have risen slightly since.

Looking ahead to the coming week, temperatures in the UK are expected to increase which will result in a slight decline in gas usage.

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