Energy eZine: an email newsletter from OGCbuying.solutions

Return to front cover

Market and Procurement

By OGCbuying.solutions

Gas Procurement Status (Valid as at 4th November 2008)
Basket % Purchased Price (Purchased + Market Value on Open) Previous Basket (Energy) Price Increase on Previous Year (Energy Only **)
Apr 08-B2 93% 62.94 42.27 49%
Oct 08-B1 100% 89.30 40.85 119%
Oct 08-B2 69% 86.46 52.46 65%
Apr 09-B1 0% 71.36 67.92 5%

* All prices in pence per therm. To convert to p/kWh divide by 29.3071.

** This comparison (and prices used) is for the energy element only which makes up about 80% of the total bill. Delivered prices will increase by less as distribution charges, specific to each client site, increase by less.

Electricity Procurement Status (Valid as at 4th November 2008)
Basket % Purchased Price (Purchased + Market Value on Open Volume) Previous Basket Price Increase on Previous Year
Half-Hourly Baskets
Oct 08-B1 100% 85.65 37.57 128%
Oct 08-B2 62% 79.74 45.69 75%
Apr 09-B1 0% 62.86 50.66 24%
Non Half-Hourly Baskets
Oct 08 100% 86.23 37.82 128%
Apr 09 0% 63.82 50.77 26%

* All prices in £ per MWh and for baseload and peak-load energy (commodity) only and are calculated based on volumes at OGCbs basket level.

** This comparison (and prices used) is for the energy (commodity element only which makes up c70% of the total bill. This comparison is used to show a trend only and excludes residual commodity volumes, distribution and transmission charge and administration charges which make up the remaining c30% and many of which are client specific. For this reason final (delivered) prices will vary by less than percentages shown.

Market headlines

Gas prices tumble from previous highs as Norwegians "turn the tap on"

Following a summer of uncertainty and sporadic flows of gas from Norway via the Langeled pipeline, gas has been flowing at around 68% of capacity since 1 October, giving the market some comfort that it will flow up to its maximum capacity once the colder weather arrives.

This confidence has been reflected in falling prices with January gas prices having peaked at £1.12 per therm but now trading at just below 80 pence.

Oil prices fall sharply as the prospects of recession loom large

Having reached peaks of $146 per barrel during July, oil prices have fallen very sharply to below $70 per barrel, a level they have not seen since May 2007. This is tempered somewhat by changes in the £/US$ exchange rate, but the impact at the petrol pump is clear for all to see.

Electricity prices slower to fall, following oil and coal but are propped up by expected tight margins for November and December 2008

Whilst electricity prices have responded to falls in forward prices for oil, gas and coal, they have fallen to a lesser extent due to concerns around very small differences between forecast demand and available generation.

This is in particular due to two of British Energy's nuclear stations being off line and not expected to return until the end of 2008 or early 2009.

Power stations subject to limited hours under LCPD given permission to extend hours

Several power stations which had their running hours limited under the Large Combustion Plant Directive (LCPD) which is designed to reduce levels of pollution until they could fit costly equipment to clean up flue gas emissions were given extra time to fit the necessary equipment.

As a result they have also been allowed extra hours above previous limits in an attempt to ease fears of power shortages during November and December.

Banking crisis signals even less trade in already thinly traded markets

As the worldwide economic crisis saw banks being supported by national governments, some being rescued, there was evidence of these institutions withdrawing from commodity markets, including energy, to concentrate on their core business.

As a result, trade and liquidity in UK forward energy markets has become noticeably thin, as if it was not already difficult enough to find sellers for periods outside the coming few months.

The graph below shows the movement in wholesale forward prices of gas (p/therm) and baseload electricity (£/MWh) for the year commencing October 2008 and the front month price for Brent Crude Oil ($ per barrel).

Movement in Brent Oil front month vs UK Wholesale Gas and Electricity for Year Commencing Oct 2008.

graph showing the movement in wholesale forward prices of gas and baseload electricity for the year commencing October 2008, and the month price for Brent Crude Oil Back to top

© OGCbuying.solutions 2008

Printable version

Rate this article

This article has been rated by 2 users, with an average of 5.0.

In this edition