Winter is Coming…

UGP Market Update 1st November 2019

Winter is coming
Winter is Coming

Demand Increases met by Renewable Energy

The effect that changing UK clocks from GMT/British Summer Time to Central European Time generally has on the energy market is significant. As temperatures drop and darker nights set in, the UK’s demand for power naturally increases.

While one might expect a rise in prices during this period, the UK’s investment in renewables has meant that this increase in demand has been well supplemented by renewable wind and solar power – holding prices steady.

In addition, whilst political events that impact the strength of the British pound generally have an impact on energy prices, Johnson’s call for a general election before the end of the year has had little effect on the pound; by Thursday it was up 0.15% against the dollar $1.2888 and €1.1595. Hence, energy prices have remained steady.

Nord Stream 2 Pipeline Announcement>

On Wednesday, significant news relating to the Nord Stream 2 pipeline caused gas process to drop by up to 2p. The line that is to run from Russia across the Baltic region has been waiting for Danish approval since April 2017, in order to construct a 147km section close to the Danish island of Bornholm.

Approval was finally granted from the Danish government this week, removing the last obstacle for the project, which has divided opinion within the EU for some time. Negative perceptions centre around the anticipation that Europe’s reliance on Russian gas in the future will increase, which in turn could tighten Russia’s grip over the region’s energy supply. Additionally, the United States have always opposed the project offering LNG to Europe to help lessen their dependence on Russian gas.

Now that work on the pipeline can proceed, it is expected to be fully operational by the end of this year which will, in turn, help Europe to meet the increased gas demand during the winter ahead, likely causing a drop in future prices.

Syrian Unrest

Prices have softened throughout the week with oil prices dropping to $61 a barrel. However, it’s worth keeping an eye on the events taking place in Syria and considering the effect that this might have on oil prices.

After weeks of escalating violence in the North of the country, a ceasefire has been agreed between Turkish forces and their Syrian counterparts. Russian troops have moved in to help establish a safe zone along the border between the two countries, seemingly for its own benefit as stability in the region safeguards Russia’s exclusive right to Syrian oil.

UGP weekly market update produced by James Hutchinson – Commercial Pricing Lead at United Gas & Power