Key points from the energy market 1st December 2016:
- Price movement on power and gas markets was subdued yesterday given the decision by OPEC to cut oil production as the cartel met in Vienna in a bid to boost prices for the oil dependent states.
- Oil prices rose swiftly throughout the day, closing above $50/bbl which equates to a greater than 10% rise in prices intraday. Saudi Arabia have taken the bulk of the cuts to production, they have reduced output by 500,000 barrels a day which amounts to nearly half of the OPEC derived cuts. Further announcements are expected from Russia and other non OPEC producers who will more than likely follow OPEC’s lead.
- Price action on power and gas markets was rather subdued given the sharp oil prices movement. This suggests further decoupling between oil and gas markets as long term gas contracts have become more reliant on liquid hubs rather than oil indexation.
- The National Transmission System spent much of yesterday near balanced but became undersupplied towards the end of the day. Demand for gas was 50mcm above seasonal normal levels placing pressure on imports from the continent.
- News filtered through yesterday morning that the UK’s largest gas storage facility, Rough, would be returning to service ‘no later’ than 9th December. The news should make gas supply more certain in the coming weeks and could provide some bearish pressure to markets.
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