Cold snap pushes up gas and power prices

The recent bout of chilly weather has pushed near term power and gas prices higher, according to the weekly market report from npower. Sammy Blay, Client Portfolio Manager at npower’s […]

The recent bout of chilly weather has pushed near term power and gas prices higher, according to the weekly market report from npower.

Sammy Blay, Client Portfolio Manager at npower’s optimisation desk said: “Weather was the main sentiment driver for near term power and gas prices as Arctic winds blew over the UK, sending temperatures to below seasonal normal levels, with heating demand rising.”

He said although the rise was partly offset by a steady supply of gas from Norway and Belgium as well as healthy power margins on the grid during peak times, they weren’t enough to stop the near term price increase.

Mr Blay said the bump in near term prices had fed through to longer term power and gas contracts, again pushing prices higher. However, he said, the main driver for the long term price increase was gains in the oil market, where Brent oil passed $106 (£65) per barrel.

This was down to a combination of factors, he added, including: “A failure to come up with a deal with Iran the previous weekend, loose monetary talks by the incoming US fed chief and continued supply disruptions with Libyan oil.”

It was a different story with coal and carbon prices, which were again subdued – the result of a gloomy macroeconomic outlook in the Eurozone, including a negative GDP figure from France, according to Mr Blay.

With the cold spell set to carry on into early December, he said temperatures will continue to dictate the market looking ahead, holding up near term gas and power contracts.

He said for longer dated contracts: “There are talks pending with Iran for a nuclear deal so hopes for a compromise will mean Brent prices may come under pressure and that will challenge any bullish support from the near term as the result of ongoing cold conditions.”

Mr Blay said he expected currency fluctuations – particularly between the pound, the dollar and the euro – to play a growing role in the global energy complex due to the increasing speculation over US monetary policy and the Eurozone’s less than impressive economic performance.

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