Wednesday 8 February 2017

Falling temperatures drive demand – Y Report

Falling temperatures are driving demand, especially in domestic heating.

This is expected to continue until at least mid-March, according to Inenco’s Y Report.

The ongoing legal dispute regarding the Opal gas pipeline between Russia and Central/Eastern Europe is also driving prices. It has raised serious questions about the security of supply in the region which could have knock-on effects across the rest of Europe.

Three nuclear reactors are due back online this week, reintroducing a combined capacity of about 1.5GW. This will help avoid system tightness during the cold period.

However, one of the Heysham reactors went offline on Monday for some planned maintenance which has taken about 0.5GW off the grid.

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Tensions between the US and Iran have heightened after missile tests, causing a lack of confidence in the oil market and raising concerns about further restrictions on Iran's exports.

Energy Trader Sam Sinclair said: "Although temperatures are set to fall below seasonal norms now until mid-March, there was a slight revision upwards at the start of this week. This has meant that gas and power prices have dipped slightly and that may present an opportunity to enter the market.

"As far as flexible contracts are concerned, this may again be an opportunity to increase hedge levels to take advantage of this dip in prices but we would advise to keep a certain amount of volume exposed in case prices continue to fall."