Energy Market Report June 2017
Prices in the spot gas and power markets remained generally soft throughout May, with day ahead gas trading as low as 36 p/th toward the end of the month.
This was driven by persistently warm temperatures, low demand, weak oil prices and falling global LNG prices. The domestic oversupply due to the unavailability of Rough storage facility was offset somewhat by higher than normal exports to Europe via the interconnector, helped by weakness in the £ against the €.
The Winter 17 contract continues to trade around 45 p/th but was not able to consistently break through that level.
In the oil market, OPEC agreed to extend production cuts out to the end of Q1-2018 but oil did not rally, as US shale production continues to ramp up and the market remains pessimistic about the effectiveness of the deal on reducing global stockpiles.
June and the summer months herald the planned outage season, notably the UK/Europe interconnector which is on a full outage through the second half of June which affects the ability to shift excess gas and could see a period of low spot prices in the UK.
Political uncertainty following the general election continues to put pressure on the £ which will attract European gas buyers for excess UK gas once the interconnector returns, but may have implications for the cost of LNG later in the year.