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Energy Market report – February 2018

Following a volatile December UK energy prices declined in January.

Temperatures warmed and wind generation was high, reducing gas demand while unplanned outages rolled off improving the supply situation and pipeline imports from Norway and the continent remained high.

LNG deliveries to the UK were once again negligible as Asian buyers continued to dominate spot shipments, though with national demand close to normal for the month this additional supply was not required. Some change in the global LNG dynamic is possible in the short term, as the price spreads between European hubs and Asian spot prices has declined recently.

Oil prices continued to rise through the month with the Brent index reaching $70 per barrel for the first time in around three years, though strength in oil abruptly stopped at the turn of the month into February, following falls in global stock markets and indications of growing production from US producers.

February to date has seen cooler temperatures and a renewed upswing in UK and European gas and power prices. A change in climatic conditions in western Europe toward the end of February sees a vast mass of very cold air originating in Siberia forecast to move in from the east, covering the continent and the UK, dropping temperatures and causing a spike in gas demand. Near term prices for gas and power have responded, reaching and showing indications of possibly exceeding the highs seen in December, showing us that the winter season is still in swing and a reminder of a similar late winter pattern in March 2013.

Gillian Thompson