UK gas and electricity markets

It’s been a hectic fortnight for the UK gas and electricity markets. Global drivers are setting the standards for the rising prices as the unrest in Libya continues and the earthquake and tsunami in Japan have rocked economic sentiment. Japan is the world’s third largest electricity consumer; it has 54 nuclear reactors which supply 30% of the countries entire generation needs. Japan is now almost entirely dependent on LNG to meet demand and has over 40 terminals across the country. Qatargas has confirmed that they will provide all the LNG needed to meet Japanese requirements, which could potentially be the majority of spot cargos.

The political rows in Libya caused oil prices to rocket to 29 month highs following fears that oil supply from the Middle East could be cut off to Western Europe. Oil has recently retreated from its recent highs. This coincides with expectations that demand from Japan, the world’s third largest economy, is to drop for a substantial amount of time. The downward pressure from reduced demand has been alleviated by unrest in Bahrain as anti government demonstrations took place. However the concern over Saudi Arabia’s day of rage fell flat as activists were deterred over fears that Islamic radicals would take over the protests.

Coal has firmed significantly, currently at around $128 a tonne for April. This is due to the German chancellor Angela Merkel announcing that Germany will be closing all pre 1980 built nuclear power stations for three months pending health and safety assessments. This will leave a large gap of 7.4 GW in German generation which will have to be filled by coal plant generation