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Why does the energy market rise and fall?


By Peter McMullan

The energy markets are mostly influenced by supply and demand fundamentals and we have recently seen demand increase with the easing of the lockdown measures as well as several factors impacting the UK supply of energy.

Key drivers of energy prices in crude oil and natural gas, have both risen significantly in recent months. The recent blockage in the Suez Canal created a backlog of LNG – Liquefied Natural Gas shipments which is crucial in the UK’s gas supply and electric generation. The previous Russia – Ukraine conflict in 2014 also elevated energy prices significantly due to gas pipeline disruption into Northern Europe, so the current escalation in tensions is also a potential upwards influence on energy prices. Future forecast influences remain mixed, with warmer summer weather likely to ease gas demand although gas demand for power generation purposes are likely to remain consistently high. Also, the later stages of easing lockdown measures may further increase energy demand.

Here is a brief overview of the influences impacting the rise and fall of the energy market:

Demand Influences

  • Easing of lockdown measures and increased energy usage (up)
  • Future warmer summer weather (down)
  • Continued high gas usage for electric generation (up)

Supply Influences

  • High fundamental prices in Natural Gas and Brent Crude Oil (up)
  • Russian – Ukraine tensions and potential impact to Northern European Gas pipelines (up)
  • Suez Canal blockage and delays/backlogs to Liquefied Gas Shipments (up)

There does remain an ample amount of time for October 2021 energy renewals and beyond but prices are rising and falling. The market is currently in a state of flux and therefore we would advise you to be proactive and to speak to Dukefield Energy (CPC’S Utilities Supplies & Services sole framework supplier) at the earliest opportunity with your energy requirements. This will allow a good window of time, for Dukefield Energy to track the energy markets on your behalf, to an improved position, or at the very least to protect budgets from the impact of potential increases.

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