Power prices follow commodity markets to new lows
Business Energy Market Brief - Jan16
Gas and power contracts continued to decline in December as record low commodity prices fed directly into the GB energy market.
Seasonal gas contracts were driven lower by a sharp fall in oil prices, which hit 11-year lows in the month. Annual April 16 gas slipped 5.1% to average 35.0p/th, hitting a new low of 32.8p/th on 24 December. A strong supply outlook also pressured prices with global LNG capacity forecast to grow rapidly in the coming years.
This was despite Ukraine planning to import more European gas in 2016 and production cuts at Groningen gas field tightening the supply outlook in the medium term. Seasonal power contracts followed gas and coal prices down, with annual April 16 power slipping 3.2% to average £37.8/MWh. Annual power and gas contracts are now at their lowest levels since March 2010.