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Energy Prices (Early July 2016)

Early July 2016



UK power and gas prices rallied sharply after the Brexit vote sent the pound tumbling against other currencies, increasing gas import costs ─ overriding any influence from oil, coal, emissions and other energy markets – which all initially slumped on the news.

Brexit and the uncertainty it has created could lead to investment in planned UK energy infrastructure projects being delayed or cancelled, potentially applying upwards pressure to long-term UK power prices. While the French and UK governments have said that the Hinkley Point nuclear plant project will not be affected, several companies have said they may now need to re-evaluate their plans.

Gas: .

While Brexit has been a key driver of UK gas prices over the last fortnight, there have also been several other factors helping to drive prices higher.

The first was the unexpected and complete shutdown of the UK’s largest storage site. This caused an immediate 8% surge in Winter ’16 gas prices.

The second was a larger-than-expected production cap reduction at Holland’s giant Groningen gas field.

And then there has been the rebound in global energy markets ─ oil and coal markets up 6% and 9% respectively since their post-Brexit trough.

Summary position:

Oil $49.80barrel

Coal $57.65/MT

EUA 16 €4.63/TCO2

Gas 42.08p/th Oct 16

Gas 42.80p/th Apr 17

Electricity £43.50/MWh Oct 16

Electricity £42.10/MWh Apr 17