A flat to bearish UK energy market

A weak dollar and the strong Brent recovery over the past two weeks have failed to influence the UK curve energy prices, according to the fortnightly update on the energy market from energy supplier npower.

Delivered from npower’s industry-first Optimisation Desk by expert Magali Hodgson, npower’s market update report helps businesses understand market movements and manage their exposure to energy price and volume risks.

Magali Hodgson comments: “At the beginning of the week ending 8 July, there were small gains on the curve that quickly vanished. Despite a rise in oil prices there was limited impact on the curve. Brent crude prices rose six per cent from $111 to above $118 while power only gained one per cent on average. This lack of correlation between power and oil prices has been attributed to carbon prices losing another €1 to trade consistently below €12.

“Last week, however, the balance of the summer UK gas and power market turned in a bearish direction due to the lack of buying interest, a weak demand, a well-supplied market and poor economic data. Gas generation is yet again dominating the generation stack, taking 51 per cent of the total stack last week compared to coal’s 25 per cent and nuclear’s 21 per cent.

“A weak dollar and the strong Brent recovery over the past two weeks both failed to influence prices on the UK curve. This is primarily due to EUA certificates seeing strong losses over the period, causing clean dark and spark spreads to widen. This has resulted in coal generation being considered a more attractive fuel on the curve than gas, therefore far power curves have been tracking coal more closely than oil.

“Looking forward, news on the US debt ceiling negotiation as well as Eurozone debt concerns continue to influence the energy complex curve, while a well supplied gas and power market is providing a bearish outlook.”

npower’s market update is just one element of its integrated approach to customer support. It is one of npower’s portfolio of risk management tools and services to help businesses manage their energy purchasing.

The npower Optimisation Desk is a unique service and provides businesses using flexible purchase energy contracts with access to information on the UK wholesale energy market and up to date advice on an individual basis.

The npower energy market updates are filmed on a fortnightly basis by independent news agency, Energy Live News.

For more information and to access the updates go to http://www.npower.com/Corporate/Risk-management/Market-update/index.htm.

To suggest a market update topic of interest or to discuss its content, please contact Magali Hodgson at npower by emailing I&C@npower.com