Power prices have once again continued to fall this week following movements in the underlying fuels complex. Weak demand and a very well supplied gas system being the main drivers.
Last week there were some concerns that Liquified Natural Gas (LNG) cargoes were beginning to falter, however we have an additional 4 cargoes arriving in the coming weeks. The highest temperatures in the UK for the year thus far have also been experienced this week. UK gas storage has surged to beyond 85% (approx. 50% higher than this time last year) and there is little doubt now that it will be full soon. Further along the delivery time line, a combination of easing oil prices due to Libyan ports becoming available to export and the continued strengthening Sterling has resulted in the longer dated contracts falling. The outlook for Sterling remains strong given the expectation of interest rates are set to rise next year.
In all, this would suggest that the bearish sentiment is set to remain with the market shrugging off comments by the Russian prime minister that if the Ukraine do not make payment there will be a “gas crisis” this Autumn.
Oil has also settled back to $110.83, down $6 from recent high points.