UK gas and power markets have been volatile over the past month, we saw a steep climb in prices followed by significant downward movement, perhaps due in large to some of the following bearish fundamentals;
· The latest sizeable aftershock in Japan had little effect on markets, UK LNG deliveries were originally thought to be impacted by Qatar’s promise to send out an additional 60 LNG cargoes to Japan. However UK supplies have remained healthy and well supplied, with a minimum of 5 cargoes due to dock in the UK between the 19th and 25th of April.
· UK supply levels are more than two and a half times the levels seen in 2010. Increased LNG deliveries and strong gas flows have enabled high storage injections and resulted in a comfortable system.
· Scorching hot weather (for the UK anyway) has resulted in lower demand and increased ice cream sales. Combined with healthy flows the lower demand has ensured the gas system has been more or less consistently long despite high storage injections and Interconnector exports.
· Brent Crude oil reversed some of its gains after touching a two year record. Increased stock piles and refinery maintenance in Europe coming to an end combined with concerns over weak economic recovery have put downward pressure on prices.
...and adding a floor to the falling prices
· Uncertainty over the escalating turmoil in the Far East and North Africa leaves many traders and market participants feeling uneasy over what direction the market may take. If the political unrest spreads, large oil exporting nations could become affected which in turn would affect oil exports to the rest of the world.
Gas and Electricity Month-ahead prices
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