Energy Market Overview

The gas near-curve has see-sawed, with a fall in quarter 1-2014 due to warmer weather which has driven the short-term prices lower, whilst summer 2014 and winter 2014 have risen due to higher oil prices.  The far-curve remains unchanged apart from summer 2016 shaping.

Power prices have followed gas prices, as gas remains the marginal fuel for power generation.

The forward curve is a snapshot of forecast future wholesale energy costs* at a point in time and is reflective of the market price for each commodity. In practice, wholesale energy costs fluctuate on a daily basis.

Since June, wholesale costs for electricity have generally increased for the next year but are unchanged thereafter. Because wholesale costs for gas are generally unchanged across most future periods with the exception of next year.

Many factors affect the cost of gas and electricity both local, typically supply and demand variances, and global, typically geopolitical. In particular, the cost of wholesale gas is closely linked to changes in the price of oil. Tensions in the Middle East caused the price of oil to rise steeply between June and September, before prices fell after an accord was reached with Iran and the P5+1, with prices recently higher due to stronger macroeconomic data from the US and UK.

The second half of 2013 saw the third-warmest weather for 23 years, which led to decreased demand for both gas and electricity. Due to this decreased demand, gas in storage has recovered to levels similar to the past five years from record lows seen in April, with LNG stocks also healthy.

* These figures and graphs are only forecasts and have no legally binding force or justify any future entitlement. These forecasts are for wholesale costs and do not include all charges that may appear on your bill.

 

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