Wednesday 30 March 2011

Global unrest pushes fossil fuel prices up

Global unrest is pushing fossil fuel prices up, according to npower's market analyst.

Magali Hodgson, npower Optimisation Desk Manager told ELN that oil prices had increased in the last two weeks because of NATO intervention in Libya.

She said: "Front month oil has been trading in a $7 range with an increase of nearly $2 from the 14th March. Brent first reacted with a fall on the back of slow Japanese growth and reduced industrial demand. But as the geopolitical issues got worse in Libya with NATO interventions, Brent front month went back to its earlier strength."

Events in Japan and Germany had affected the price of coal, she added: "Coal spent most of the first two weeks on the rise.

"Not only Japan had a bullish impact but also the announcement in Germany didn't help. Germany announced that they would shutdown on safety grounds all of their nuclear reactors built before 1980, a total of 7. Some of their shortfall in generation should be picked up by their large wind and solar generation but coal would also need to play a part."

Uncertainty of supply was affecting the UK gas market, said Ms Hodgson: "The market is still trying to assess the impact Japan will have on European LNG (liquid natural gas) deliveries."

It remains to be seen what will happen to energy prices in the next two weeks, she concluded: "Geopolitical issues in the Middle East and North Africa will drive the gains in oil prices and the debate on nuclear generation will still be a deciding factor for the whole of Europe. Results of the German election will also be a big driver and possibly shaping the longer term nuclear outlook over there."

Related TV story:

The Market Report: 29th March 2011