Short-term UK energy markets came under pressure throughout February, driven down by unseasonably warm temperatures; a sharp contrast to January’s freezing conditions. Fluctuating wind generation, from 1GW on the 4th to 11GW on the 11th, caused short term power prices to swing.
Longer term prices, on the other hand, were pulled between a rallying oil market and falls in gas, carbon and coal prices. Oil prices ended the month over $3/barrel higher at just over $66/barrel. The oil rally came as a result of deepening OPEC cuts from Saudi and Venezuela and falling US oil inventories which coincided with fresh optimism regarding the US-China trade deal.
The pound strengthened in February following expectations of a soft Brexit, which aided the drop in UK power and gas prices as this reduces energy import costs. Brexit is likely to be a key driver this month as the 29th March looms.
Towards the end of February, forecasts of cooler weather conditions provided some support back to UK energy prices along with strengthening gas and carbon markets. March will be interesting as markets may start to relax further as long as the country doesn’t witness a repeat of last years “Beast from the East” which resulted in record gas and electricity price spikes.