Utilitywise is one of the UK’s leading energy and water cost management consultancies. The company provides weekly market updates based on its analysis of relevant data. Recently, it has released a weekly market update for the week of 24 March, 2014. This recent update notes that wholesale gas and power markets had seen a rally and spike in early March but had reverted almost entirely back to the levels before that period by the end of the month. The weekly update report notes that the situation in the Ukraine had most likely been a major reason for the gains the market saw, while it also notes that the market had likely been oversold since the beginning of the year, with strong indications pointing towards the latter.
The report points out that there is a significant interest now in whether the market will push even lower or if the prices will rise again, now that the prices have returned to the levels they were at before the rally in the early days of March of this year. The downside of the market is also contributed to, the report says, by means of the gas and electricity supply system, which remains in generally healthy condition. Although outages in nuclear capacity, whether planned or unplanned, may have been thought of as potentially sparking a need for gas-fired generation, which is significantly more costly, this has not been the case as wind has remained firm. As a result, the subdued output resulting from nuclear capacity outages has not resulted in the need for gas-fired generation.
The UK Budget, released mid-week during the period relevant to this report, included a variety of policy-related changes that may have contributed to an impact on power prices. Still, the potential impact of these changes in the UK Budget was tempered somewhat by the fact that the modifications were largely expected, with pricing in of these modifications having already occurred earlier in the year. Also relevant to the week’s report on the market were the various power problems experienced in Norway. Significantly, however, imports to the United Kingdom were not seriously impacted upon by the power problems in Norway, which had affected gas production in that country. Improvement was also noted in LNG stocks, as the fourth cargo for March was announced in the relevant week to have been confirmed for delivery by the end of the month.