It could be a good opportunity for customers to place fixed price contracts, according to Inenco’s Y report.
That’s because gas and power prices “have moved away from contract lows seen earlier in the year and haven’t shown necessarily signs of getting back to them over the short term”, according to Energy Trader Dorian Lucas.
He added: “Although the market isn’t at the bottom of the market anymore, if you look at it in the terms of the last 18 months to two years, we are largely at the bottom of the market so if you entered and placed a fixed price contract now you’ll be achieving an almost bottom of the market price.”
For those customers who are looking to place flexible contracts, that would be down to their “attitude to risk” and “current hedge levels”.
Mr Lucas added: “However if you’ve got no hedges in place whatsoever, this represents a good opportunity for you to increase those hedge levels. However there is a strong argument that prices could decrease going forward so if you want to maintain some exposure, that’s great, you potentially are going to benefit from that over the short to medium term.”
Gas prices have fallen this week due to an oversupplied system as flows from Norway through the Langeled pipeline as well as LNG flows are “strong”.
On the power system, wind generation is expected to increase and all nuclear maintenance works have ended which will increase supply and margins will be wider.
Mr Lucas went on: “Looking at power prices, the fact that gas has got cheaper has a knock-on effect on power as well the fact that we are seeing an increase in renewable generation and all the offline nuclear have come back following the end of maintenance. That’s basically seeing supply margins widen and having a knock on effect in terms of dampening power prices.”
He believes oil prices won’t trade above $50/Bbl in the immediate short term due to an oversupply.