Healthy supplies of gas keep prices low

Healthy supplies of gas kept prices in the near future or “near term” low last week, according to the latest market report with npower. Ben Spry, Optimisation Service Desk Manager […]

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Healthy supplies of gas kept prices in the near future or “near term” low last week, according to the latest market report with npower.

Ben Spry, Optimisation Service Desk Manager at npower said this was the result of “high LNG flows and good flows from Norway”, on top of a stronger pound versus the euro, as well as a “healthy supply outlook” going into December because of milder weather forecasts last week.

Despite varying amounts of wind output, the power system remained comfortable, with peak margins around 10GW, meaning near term power contracts headed lower as well.

Mr Spry said there was “limited price movement” in the market with falls in near curve, coal and carbon prices offset somewhat by a stronger price for Brent crude oil, which rallied late in the week.

Brent oil – which is used as a benchmark for oil prices – hit $111 per barrel as the deal between Iran and the West over Iran’s nuclear capabilities “looked less likely as we reached Friday”, said Mr Spry, adding that “simmering tensions” in Libya seemed likely to limit oil output.

Looking ahead Mr Spry predicted temperatures would once again dictate the mood of the market, with forecasters anticipating a colder December than usual. He said despite a healthy supply outlook, prompt and near term gas prices would be pushed higher.

LNG would be key to the gas market, he added, with three more tankers set to “buoy” the UK’s stock levels but “attractive Asian prices casting doubts on how long supply will last.”

Peak power margins would be a lot tighter if the cold continued, he said, with wind output key to short term prices.

Mr Spry expected prices for Brent crude to remain volatile “as the market weighs up the true impact of that deal struck between Iran and the West.”

He told people to watch out for developments in the US, where questions remain over if and when the Federal Reserve will taper off quantitative easing.

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