Wholesale energy prices nudge downwards

Wholesale energy prices nudge downwards

In a change from the norm, gas rather than oil decided the direction of wholesale energy last month.

A steady stream of imported LNG (Liquefied Natural
Gas) helped drive the firmus energy index down by four per cent which
now stands at 87.

The cost of oil, which has been seesawing since the
start of the year, eased by just one per cent. It appears the recovery
in prices from the January low of 47 dollars a barrel has petered out.
Weighing down as ever on oil prices is the continuing glut on the world
market. With OPEC refusing to cut output at its June meeting, the supply
of crude has risen year on year by over three million barrels a day,
outstripping an increase in demand by a factor of two to one.

Commenting on the May firmus energy Index, Des Brown,
firmus energy’s director of marketing and customer operations explains:
“Gas prices were led lower not just by imports of LNG into the UK but
also by weakening demand amid rising temperatures. During the month the
cost of gas dropped by seven per cent. However the future looks a little
uncertain. Russian gas, the cost of which is linked to the lagged price
of oil, should continue to get cheaper. But the on-going
Ukrainian/Russian conflict might mean an interruption to those lower
cost supplies.”

Low coal consumption in Europe
and plentiful supplies, especially from Colombia, produced a modest one
per cent price drop. The soft Western market reflects global trends.
China, which accounts for half the coal burnt in the world, cut its
consumption by eight per cent in early 2015. With demand only bearing up
in poorer countries where consumers have less real choice, world prices
are expected to continue heading lower.

The falling price of gas was a major factor in lower
electricity costs. The wholesale cost of power dropped by nine per cent
month on month. But windy weather played a part too as spinning turbines
displaced more expensive power stations from the grid

Last updated on 11/05/2016

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