Warmer temperatures to drive markets – Y Report

The main driver for energy markets over the next few weeks is temperature rising above normal seasonal levels. Rough Storage has had limited capacity for the whole of this winter period and mid-range storage levels […]

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By Jonny Bairstow

The main driver for energy markets over the next few weeks is temperature rising above normal seasonal levels.

Rough Storage has had limited capacity for the whole of this winter period and mid-range storage levels are also starting to be depleted due to the recent cold snap, according to Inenco’s Y Report.

A series of planned and unplanned nuclear outages have seen a heavier burden placed on coal and gas rather than renewables, which is currently seeing subdued generation.

Risk premiums are expected to fall away from prices as the coldest part of winter nears its end.

 

The increase in temperature has resulted in a decrease in demand. As a result, day ahead prices have fallen off. Combined with depleted gas storage levels, this has had an effect on seasonal prices further out on the curve.

The more these reserves are depleted, the more the UK will have to inject during summer, which may add a premium to prices then.

Energy Trader Sam Sinclair said: “In terms of fixed term contracts, I’d be tempted to hold off for a week or so just to let prices re-adjust to the temperature increases that we’ve seen over the last few days.

“In terms of flexible contracts it’s a similar story really – there is opportunity and if we just hold on for a week or so we’ll let prices re-adjust. If we don’t get another cold snap on the horizon as we get through the winter period, premiums could really start to fall and flexible contracts could yield some good results.”