Tuesday 6 September 2016

Buyer's Market - Get Stuck In

Open those valves
There is a pronounced and timely surplus of natural gas right now, with no obvious end in sight.  With even Gazprom having run up the white flag on oil-price indexation, now is an excellent time for the utilities to be buying.

Centrica, a company of mixed virtues (check the tag for past examples) but always exceptionally shrewd in its purchasing - of assets as well as commodities - has just taken the opportunity to back up the truck to Qatar for a big contract roll-over, which is intelligent.  They'd already done the same with Gazprom last year.

Interestingly, for the first time in years gas-fired power plants are back in-the-money (hence all the big coal-plant closures this year).  It's not so surprising in the UK with our 'carbon price floor' (a tax devised by Osborne) which boosts gas at the expense of coal.  What's more surprising is that there is a small window of gas being in-the-money in Germany, where they still have only the perennially depressed Emissions Trading Scheme carbon price to contend with.  That really is somewhat unexpected, and probably won't last for long into the coming winter as gas prices rise, both seasonally and with the time-lagged effect of the upward nudge to oil prices since January (Germany still buying a bunch of gas at oil indexation).

This is real energy business, and to hell with Hinkley and the EU 'Energy Union'!



Edna said...

Does this mean I'll be able to use the gas fire this winter without having to give up on food. These pensions don't stretch very far these days.

James Higham said...

Whither fracking?

Nick Drew said...

'Edna', good luck to you: successive governments have been driving your electricity bill up needlessly

we covered the fairly likely problem of gas storage this winter a few days ago

James - I think there is glacial progress on several prospective sites: but wholesale prices are so low just now, there's nothing to be looked for on that front for years, swampy or no swampy: the economics are just not there yet with so much Qatari / Australian / US gas on the high seas, and Russian gas in the pipeline