Business Energy Market Brief July 2012
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Business Energy Market Brief July 2012

Chris Hurcombe

by Chris Hurcombe 01 July 2012

Report Summary:

Energy Market Brief July 2012

Energy Market Brief July 2012

Energy prices fall as economic picture remains unclear - GB wholesale power and gas prices in June followed the falls in the wider markets as growth in China and the US seemed to falter and the debt crisis continued to affect the European economy. Annual coal hit a 20-month low of $95.4/t on 12 June as the market remains oversupplied, while the month-ahead Brent crude oil plummeted to a 20-month low of $89.1/bl on 22 June. This was the biggest weekly drop in oil since summer 2011. On average the annual October 12 gas price lost 4% over the month but bottomed out at 59.7p/th on 21 June.

Average annual October 12 baseload electricity price also saw a 4% decrease over June and reached a two-year low of £46.2/MWh on 21 June. Annual prices are now approaching levels seen at the beginning of 2010 when prices were around 55p/th and £46/MWh. Power prices have fallen further than gas as a result of the low carbon prices, which has led to coal being favoured over gas as generators seek to make the most of remaining operating hours under a European directive. On average coal provided 36% of the power this month.

Short-term energy contracts see reduced fall

Short-term prices were similarly affected by falling oil and coal prices, but gas supply disruptions caused by interconnector outages helped limit the falls.   The average day-ahead gas prices in June were 5% below May at 56.5p/th. Day-ahead gas prices have fallen 18% from the peaks seen in February and March. The average day-ahead baseload electricity price fell to £42.2/MWh in June. This was 4% below May and 15% below the peak seen in February.

Energy prices could reduce ahead of summer

Short-term power prices should stay low throughout the remainder of the summer as coal-fired power stations run flat out to take advantage of the low coal prices. Longer-term prices could continue to fall if economic uncertainty continues, though the market may be bottoming out. But prices could rebound if robust measures are put in place to alleviate the European debt crisis or a supply shock disrupts supplies of gas or oil.

Catalyst Energy Solutions’ independent approach enables clients to manage their exposure to energy price risk, while at the same time benefiting from a first-class service. Our procurement solutions make it simple: contact a member of the team on 0870 7107560 to discuss your energy buying requirements.