Utility Week - authoritative, impartial and essential reading for senior people within utilities, regulators and government
Issue link: https://fhpublishing.uberflip.com/i/464851
UTILITY WEEK | 20Th - 26Th FEbrUarY 2015 | 27 Markets & Trading This week Brent crude price hits a two-month high Price rallies after global oil glut that drove prices below $50 a barrel appears to ease The price of Brent crude has rebounded from five-year lows to its highest level in two months, with expectations of further gains over the coming months. The price of Brent crude fell below $50 a barrel in January aer a 60 per cent decline from last summer's levels of around $110 aer oil producers agreed not to cut production despite lower global demand. Lower oil prices weighed down the price of gas and power across Europe, sparking renewed calls for UK utilities to slash household energy tariffs. But as expensive oil projects start to cut back on uneconomic production the global glut is beginning to ease, allowing Brent to pare some of its recent losses and offer greater support to gas market prices. "People fear that a supply curtailment sufficient to really tighten the market is under way," a UK-based trader told Utility Week. "There was a lot written about building US inventories, and when those numbers came out to the low side of estimates last Wednesday [11 Feb- ruary] the market rallied hard," he added. Analysts have predicted a return of oil prices to about $70 a barrel by the second half of the year, but the trader cautioned that increased volatility in the market price is expected in the near-term. At the same time, a decision by the Dutch govern- ment to limit the amount of gas produced from its Gronengin gas field in the first half of the year caused gas prices across Europe to move higher on concern over tighter supply. JA EnErgY Global emissions trading system vital A global carbon market is "crucial" to keeping greenhouse gas emissions at a safe level, the Energy and Climate Change Committee has warned. The committee advised that any agreement reached at the UNFCCC COP 21 in Paris in December must ensure that disparate regional, national and sub-national emissions trading systems are compatible with each other in the future. Committee chair Tim Yeo stressed that putting a price on carbon is "absolutely essen- tial" to curb climate-changing greenhouse gas emissions in an "economically efficient" way. "But," he said, "using taxes to set a carbon price does not guarantee any particular level of emissions reduction because the emitters may simply pay the tax and carry on polluting. "Emissions trading lets us set a cap on emissions and enables participating businesses to iden- tify the most cost-effective ways of reducing their emissions. "The world's largest econo- mies, China, the US and the EU, are already embracing emissions trading, so there are reasons to be hopeful about the prospects of progress in this area." Emissions trading works by selling permits to emitters for every unit of emissions they release, with the total number available set by governments or supra-national bodies. ELEcTrIcITY UK has 10 per cent of EU's wind capacity The UK installed 1.7GW of wind energy capacity in 2014 to reach a total of 12.4GW, or 10 per cent of the EU's 128.7GW capacity. Data from the European Wind Energy Association shows that in 2014 the UK was the second largest market for new capacity in the EU. The largest was Ger- many, with nearly 5.3GW of new capacity. Sweden came in third with 1.05GW, closely followed by France with 1.04GW. Meanwhile, the rate of new wind project installation in previ- ously large markets such as Den- mark, Spain and Italy showed a significant decrease of 90.4 per cent, 84.3 per cent and 75.4 per cent respectively in 2014. Overall, in 2014, the total amount of generating capacity installed in the EU was 26.9GW, 9.4GW less than in 2013. Wind power had the high- est installation rate in 2014 with 11.8GW installed, representing 43.7 per cent of all new installa- tions. Solar PV was second with 8GW (29.7 per cent of 2014 installations) and third coal with 3.3GW (12.3 per cent). No other technologies came close to wind and solar in terms of new installed capacity. Production was not cut despite low demand Tricks of the trade Jillian Ambrose "At least for now we have a break from the bears" Things are looking up for Europe's energy markets. Well, at least in terms of market prices. And at least for this week. Although it would be a very far cry to say any energy markets are bullish, aer months and months of stead- ily falling prices and multi-year lows the direction of travel has turned north. Even a dead cat bounces, as the saying goes. But the recent upturn in gas, power and carbon prices is based on more than a based negotiations seeming set to bring in much-needed reform through the market stability reserve sooner rather than later. As a result, the UK power price – as measured by the Icis' Power Index – has returned to the levels seen at the beginning of the year aer losing six per cent of its value with declining gas and oil. No-one is suggesting that the only way is up but at least for now we have a break from the bears. little post-crash profit taking – fundamentals are shiing and real volatility looks set to return. In the oil markets, nine months of plunging prices have forced out more expensive pro- duction to cut into some of the global glut that forced the falls in the first place. Similarly, the Dutch gov- ernment's decision to reduce domestic production of gas has altered the supply-demand balance to allow European gas prices to recover lost ground despite relatively low demand over the past year. Tighter supply looks increas- ingly likely for the carbon market too, with key Brussels-