Wholesale price snapshot February

Oil prices continued falling over the last two months to below $50/bl.

Oil prices continued falling over the last two months to below $50/bl.
Throughout December, Brent crude oil continued its sharp falls as OPEC producers reiterated that they would not cut production levels, leaving the market in a continued state of oversupply. As a result Brent crude fell 21.3% over the month to reach $56.4/bl, its lowest level in over five years, filtering through into long-term UK gas and power prices.  
Sharp falls in oil, as well as continued reductions in coal prices, pulled long-term contracts down over December. Summer 15 gas dropped 3.4% to average 50.1p/th, ending the year 19.5% lower than levels seen at the start of 2014. Long-term power prices followed, with the summer 2015 contract dropping 1.6% month-on-month to average £47.1/MWh. Annual April 2015 power was down 2.2% to average £49.2/MWh.
UK spot prices were bearish in December due to the effects of mild weather and high wind generation reducing demand. Day-ahead gas dropped 0.6%, averaging 53.9p/th, reversing gains seen over the previous four months as the system was comfortable throughout the month. Day-ahead power lost 10.5% to average £43.1/MWh and hit a five-month low of £36.0/MWh on 31 December as a result of consistently high wind generation, which reached a record level of 7.3GW on 7 December.
Brent crude oil continued its slide throughout January after Saudi Arabia said it was willing to hold out for $40/bl. As a result, Brent crude fell a further 21.3% over the month to average $50.0/bl, its lowest level in over five-and-a-half years. The falls, combined with a healthy storage picture, sent long-term UK gas and power prices lower in January.  
Summer 15 gas dropped 13.6% to average 43.3p/th. Power prices followed their gas counterparts, with the summer 2015 baseload power contract dropping 1.6% month-on-month to average £47.1/MWh. Annual April 2015 power was down 9.3% to average £44.7/MWh.
Spot prices remained bearish in January as an increase in LNG deliveries and high wind generation reduced pressure on the system. Day-ahead gas dropped 14.2%, averaging 46.3p/th, as high storage levels outweighed supply disruptions at Norwegian gas fields. Day-ahead power lost 8.3% to average £39.5/MWh, as a result of the consistently high wind generation throughout the month. Colder weather is expected to continue through February, with weather warnings in force and snow anticipated in the coming weeks. This could boost demand and increase sensitivity to supply issues – potentially driving short-term prices higher

 

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