October Energy Market Report
Dawn Pratt, Commercial Energy and Utility Management
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Overview
Storm Alex brought winds of up to 65mph over the weekend along with flash-floods and unplanned power outages in over 20 areas across the UK. The Energy Networks Association, the national industry body for gas and electricity, said the storm had not caused "significant disruption" but that it was monitoring the weather "very closely".
Demand for energy also remains low, with coronavirus continuing to spread across the world, with more than 1 million deaths and 35 million cases across 188 countries. The US, Brazil and India remain the top 3 countries in terms of the number of cases, with over 20% of the confirmed cases being reported in the US. Last week it was also confirmed that President Trump had tested positive for COVID-19, which saw markets drop and Brent crude trading at its the lowest price in over 3 months.
As the global surges of new cases increase, an uplift in international travel helping to increase the demand for oil does not look likely any time soon. For now, this will keep the wholesale price of oil lower than the pre-pandemic levels where it was between $50 - $60/bbl. However, it does not necessarily mean energy contract prices will drop as substantially again, especially with the introduction of amended third-party costs to help balance the costs for energy suppliers.
Bullish Factors (upward pressure):
- A strike in Norway shutting 6 offshore oil and gas fields on Monday (with more closures possible, as the strike continues to escalate over wages), which has lowered the high levels of supplies in production and storage, whilst demand is still low.
- President Trump leaving the hospital and looking well, which helped increase the exchange rate of the USD and saw oil prices soar.
Bearish Factors (downward pressure):
- Global surges of new coronavirus cases, with more than 35 million confirmed cases in 188 countries.
- International air travel collapsing, with the future of long-haul flights looking bleak.
- The initial news that President Trump has tested positive for COVID-19 pushed prices lower and uncertainty around his health and recovery weighs on the market.
www.utilinet-yorkshire.co.uk | Dawn Pratt | 07810 717304