Maintenance on Qatargas infastructure causes spike in UK energy prices

So, the past fortnight’s energy prices plotted on a graph look like the south side of Mount Everest. October 11 power prices have risen by around 6% in the past two weeks whilst Brent Crude oil reached a four week high, despite weak economic data. So the sudden upturn in prices we hear you ask?

Last Friday, Qatargas, the world’s largest LNG export terminal decided to shake things up by announcing that they would be carrying out maintenance on 3 of their 5 production trains between now and November. This could potentially mean that LNG deliveries to the UK are stunted in the short term future. The news has coincided with colder than seasonal norm forecasts for the start of winter.

Qatar gas claims the news is in anticipation of a downturn in the global economy, meaning less demand. However, it is likely that they were playing a tactical game, keeping the news quiet until the last minute. Prices had been moving lower until Qatargas’s news so it is possible it had been strategically kept hush hush until now so that panic ensued and the price for LNG rocketed. Yey for Qatargas and their profits, boo for UK energy markets!

It is possible that the market has over reacted to the maintenance on Qatargas’s infrastructure and the spike in prices shouldn’t be maintained due to other bearish factors, i.e. weak economic data...

·         US employment figures are down

·         European and US consumer confidence levels have dipped

·         The Canadian economy has shown no growth for the first time since the recession in 2009.

All these indicators should signify a dip in prices if stock market values lower and industrial energy demand ends up taking a hit.