Tuesday 19 July 2016

Rough storage offline until 2017 – Y Report

Rough storage offline until 2017 – Y Report

Centrica has announced the Rough gas storage facility will be offline from now until March 2017.

Dorian Lucas, a trader at Inenco, said: "That's going to have the effect of dampening prices during Q3 and Q4, where we would typically look to inject into the storage facility.

"However, the big upward risk that's going forward is going to be the inability to withdraw, or withdraw to the amounts we have done historically during the winter 16 period, which could potentially see prices for the winter increase."

Oil went up to $50/bbl, briefly traded above this mark and finally settled at $47/bbl, offering very little price incentive to gas and power.

Mr Lucas notes that temperatures are increasing this week, dampening gas demand but possibly increasing power as AC demand rises.

[youtube url="https://www.youtube.com/watch?v=VGTTyFrNGNs" width="560" height="315"]


More expensive forms of generation may be needed to balance supply and demand which could see power prices climb.

Gas prices have fallen in the last week – this will probably continue due to high seasonal temperatures and lower demand.

Gas and power contracts for winter and beyond increase to match comparative levels to August last year.

Mr Lucas suggests that fixed price customers should enter the market and fix their price as soon as they can, for a minimum of 2 to 3 years.

Flexible price customers with high hedges do not have much incentive to increase but those with low hedges are advised to increase the hedge to mitigate risk.

Written by

Bruna Pinhoni

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