Thursday 8 January 2015

Volatile short term gas prices continue – DMR

Volatile short term gas prices continue – DMR

Gas and power prices were volatile once again this morning, according to the daily market report from npower.

The price of gas for delivery in February had “swings of nearly a penny” while the equivalent price for power jumped around 30 pence.

Tim Carter, Client Portfolio Manager at npower’s Optimisation Desk said: “Front month gas contract is now trading at 46.6 pence per therm but has been pretty volatile already with swings of nearly a penny.”

Similar swings for prices a little further into the future - with the front season up 0.35p per therm at 43.75p - are "demonstrating the market sensitivity at the moment”.

It was the same story for electricity, said Carter: “Power prices like gas are being volatile this morning with February [15] opening 30p per megawatt hour (/MWh) up on the close but this has already been given back and it last traded at £40.35/MWh.”

Brent oil “recovered” yesterday, now trading at $51 per barrel but analysts are “really struggling” to understand what is bolstering the price without the Saudis capping oil production.

Carter said: “Yesterday’s support appeared to come mainly from speculative buying… but the US crude inventories did turn lower to give some fundamental support as well. Coal is following oil’s lead, settling around $62 per tonne mark.”

The gas system is just 5 million cubic meters short today while there is a “comfortable” power system.

CCGT gas plants picked up a touch, which he said “could be seen as early signs of fuel switching as the gas price becomes a bit more attractive”.

Written by

Bruna Pinhoni

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