Bearish market for energy buyers

18 January 2012

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18 January 2012 | Adam Leach

UK energy buyers are advised to strike now to secure their energy contracts for the next few years as high levels of supply in the UK and Europe is creating a bearish market.

It may have been cooler in recent days in the UK, but it has been quite a mild winter, which means there’s plenty of gas left in storage.

Speaking to SM, Martin Rawlings, director of Blizzard Utilities and chairman of the CIPS energy special knowledge group, said he recently renegotiated energy contracts that go up to early 2015 for all his clients. He said that plentiful supply levels and warmer-than-expected weather had enabled him to get rates that were lower or the same as last seen in 2009.

“It’s good for the suppliers because they retain businesses as clients and can commit their buying power now, when prices are low,” he said.

Rawlings explained that even though he has extended contracts up to 2015, he might well look to extend them again this year if the market remains favourable.

“The market shows every indication of remaining bearish,” he said. “Temperatures are staying low, there’s a lot of gas in storage, there’s more gas on the continent waiting for a home and there’s more LNG cargo coming in. And because gas is down, electricity is down with it.”

Last week, EnergyQuoteJHA also reported a bearish market for both gas and electricity buyers. Its UK Energy Focus report, published 11 January, said the weather had resulted in the price of gas easing.

“So far the winter has been relatively mild, which has meant that prices have been lower than they otherwise might have been. With the winter heating season now at the half-way mark, there is plenty of gas left in storage, with volumes at 88 per cent compared to 43 per cent last year,” it said.

In stark contrast, businesses in Japan are set to face a tough year on energy prices in the wake of last year’s earthquake. Yesterday, Tokyo Electric Power Company (TEPCO) announced that it would be increasing its rate for corporate clients by 17 per cent from 1 April in order to offset rising costs, due largely to last year’s earthquake.

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