November saw the majority of contracts decline in cost, with the exception of immediate start dates which saw increases as we head into winter. The day ahead price increased dramatically throughout the month as temperatures stayed below seasonal norms, accompanied by low levels of wind generation.
As can be seen below, the month started by continuing the trend of previous months with a continued decline. This trend is driven by increased LNG shipments arriving in the UK with a healthy forecast for more, which is supporting UK storage levels at a 5 year high. Towards the end of the month we saw costs across all contract periods increase as the colder temperatures took hold, this was however tempered by the over supply of LNG.
The below price chart is for annual contracts commencing summer 2020.
Electricity has followed the path created by gas, due to our generation mix still being reliant on gas fired generation. The below chart shows contract prices for summer 2020.
Brent Crude was volatile in November but with a general upward trend. The month opened at c$60bbl and closed at c$63, this represents a 5% increase in the month. The volatility was mainly lead by the ever present US-China trade talks and the prospect of further OPEC cuts. The China – US talks hit a large hurdle when China responded to Trumps support of protests in Hong Kong.
December Energy Price Outlook
Despite the volatility in the market, the contract costs for renewals upcoming in the next 12 months are still favourable. This is however, heavily caveated by Brexit and the potential for the volatility this may bring. Our recommendation is still that any business with a renewal in the 12 months should contact us to review their options. There is no commitment to contract at this stage, but fully understanding the available options will increase the businesses ability to have a success procurement.
December News Stories
General Election –
Energy has featured heavily in the election so far (here are the polices):
Conservatives – promising heavy investment in efficiency schemes, fast charging networks and both on and off shore wind farms. Also announced was £500m to support intensive industry in low carbon technology.
Labour – promising a net zero carbon energy system within the next 20 years and a renationalisation of the industry.
Liberal Democrats – promises to restructure all government policies around climate change, with at least 80% of all energy being generated by renewables. They also announced a total ban on fracking.
The Green Party – promises to double the capacity of the grid, create new interconnectors to Europe and transform the planning system to grow renewable generation on shore.
SNP – would oppose new nuclear power stations and fracking in favour of renewable generation with the aim of a 75% reduction in emissions by 2035.
National Grid and SSE off shore assets to protect shareholders –
In direct response to Labours renationalisation policy National Grid and SSE have moved assets of off shore companies to protect the shareholders interests. Click here to read more.
OFGEM remove licenses –
Following the collapse of record numbers of suppliers OFGEM have acted to clamp down on off the shelf supply licenses. OFGEM have cancelled 26 supply licences that are linked to just 5 individuals. Click here to read more.
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