A stronger pound pushed down gas prices over the last week following the Bank of England’s decision to freeze interest rates, according to a new market report released today.
New governor of the Bank Mark Carney’s announcement on 7 August boosted the British currency, with the exchange rate rising from 1.152 euros to the pound in the morning to 1.163 euros later that day. It has since risen higher.
In npower’s weekly market update, Ben Spry, Client Portfolio Manager for npower said: “Gas prices fell after the pound strengthened against the euro as the Bank of England announced that interest rates would remain at 0.5% until the unemployment rate fell to 7%.”
This was against a wider trend of “subdued” trading levels, he said: “Trading activities continued to be subdued due to the summer holiday period. The curve lost value on weaker Brent oil and coal.”
As for the underlying markets, Brent crude fell by around $1 a barrel on the back of signals from the new Iranian president Hassan Rouhani of his “willingness to negotiate with the West”, while coal prices fell to a new low of $82.50 (£53.4) per tonne because of slowing demand in Asia.
Looking ahead, gas is likely to drive near curve power prices, said the analyst: “Much will depend on the gas system’s ability to cope on limited flows from Norway, as both [gas terminals] Kollsnes and Easington will be on maintenance. This will leave LNG, medium range storage sites or imports through the IUK to fill the void and ensure the system balances.”
Demand for gas is set to “stay muted” as temperatures are forecast to be around seasonal norms he added and two LNG tankers due to be delivered this week should mean gas flows “remain at recent levels”.