Wholesale energy prices nudge downwards

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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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