Tritility Energy News 08/01/20

Tritility Energy News is our monthly report which provides an insight to all the latest news and trends in the energy industry. We also include how this affects energy prices for your business and our predictions for the future.

Summary

  • The conflict between the US and Iran causes a spike in energy prices after a senior Iranian military commander is killed in US airstrike.
  • Russia and Ukraine finally announce they have agreed on new five-year gas transit deal
  • Increased wind generation throughout December 2019 set a new record of 26.5%

Gas Summary

As the year-end approached gas prices saw a significant decrease. Wholesale prices dropped around 10% from mid-December as a result of unseasonably warm weather. This has caused gas storage levels to remain at a healthy level. Demand falling considerably during the Christmas and New Year holidays also contributed to the new lower prices.

News broke last week of Russia and Ukraine finalising their new five-year gas transit deal. The announcement came just one day before the expiry of the previous ten-year contract which allowed Russia to transport gas through Ukraine into Europe. Gas prices have since continued to fall with the possibility of interrupted supplies from Ukraine ruled out and temperatures remaining above average. Prices also dropped across the power market on 31 Dec as a result of the deal. Since the New Year, Russian gas flows into Europe have been lower than would have been expected. In turn, this helped to strengthen the already increasing oil market with energy needing to be sourced elsewhere.

Power and Wider Fuels Summary

Wind production soared above average across December setting a new wind record of 26.5% for December’s Uk energy generation. High wind energy levels are predicted to remain until mid-January, continuing to ease the demand for gas.

Early last week, a resolution to the ongoing US and China trade war appeared to be in sight. President Trump announced ongoing plans for both countries to meet mid-January to sign phase one of the trade agreement. This led to both coal and oil prices rising after previously suffering from the conflict between the two nations.

However, this advance was quickly reversed as major concern arose on Friday due to conflict between the US and Iran driving both the coal and oil markets to spike. The dispute came after the US orchestrated an airstrike in Iraq, killing a senior Iranian military commander. In a statement released, Iran declared that they will abandon their commitment to nuclear restrictions imposed in 2015. As expected, retaliation from Iran came in the early hours of 08 Jan when they fired rockets at two airbases in Iraq which house US troops. If tensions between the two continue, oil prices will undoubtedly keep rising short term, with a knock-on effect on the wider market. However, since both countries have suggested neither are looking for escalation or war, these spikes should remain short term.

While reasonable measures are taken to ensure the information above is from reliable sources, we cannot guarantee complete accuracy. Views expressed are solely those of the author, not Tritility, and are subject to change without notice.