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Energy Market Report May 2017

The Gas and power markets maintained a downward trend through April as warm temperatures subdued demand and increasing speculation around the UK’s largest storage facility mounted. Rough owned and operated by Centrica offers 70% of the UK storage capacity. Centrica have announced it will be unavailable for this summer and winter (if ever again). Although on immediate thought you would think this could have an upward effect on prices due to the reduction in security of supply, it has turned out not to be the case. Usually at this time of year the UK is injecting into storage thus increasing demand, however with no injections available we have additional gas and this has had downward pressure on the market. Additionally Centrica have been withdrawing from rough adding a further gas to the system and resulting in heavy exports to Europe.

Outside of storage issues, temperatures for the back end of April cooled and we have seen this trend continue as we go through May with fluctuations between below and above seasonal norm temperatures. This has help slow the downward momentum along with some maintenance in Norway.

Further downside pressures came from falling oil prices as they dropped from $57/bbl to lows of $47/bbl over the past 6 weeks. Primarily driven by higher supplies in the US and questions around the effectiveness of OPEC cuts in production. We have recovered to $50/bbl this week ahead of a meeting by OPEC members on the 25th May where they are expected to extend cuts beyond the original June end date.


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Corona Energy Editor