Energy Buying Support for Independent Hoteliers
Energy market rates continue to rise at alarming rates. We advise hotels to review their current energy deals and clearly plan their management of this category over the coming year.
Recommendations
Prices have continued to surge higher still and further volatility is expected to continue in the longer term, and we are expecting underlying increases in pricing due to the gas storage situation along with the current supply side issues. As the winter approaches, the strength of the anticipated cold that comes with the season will have differing impacts on the price of energy. For example, colder than average weather will entice stronger demand which will in turn cause prices to surge. Extreme cold will exasperate this upward trend further, whilst a “normal” winter with temperatures in line with the seasonal norm will allow for some losses in the market possibly, although this will be heavily reliant on a ramp up in supply via LNG which continues to look strongly unlikely. Therefore, we can continue to expect lots of risk premium to remain in contracts for the time being as it would be folly to rely on the UK weather to come in above average throughout the whole winter period; because of this urgency is encouraged with regards to new renewals as the longer the weak gas storage situation ensues (which could coincide with colder weather over the winter), the more we will continue to see prices rise in the future also.
Utility Trading Graphs
Electricity
Gas
Market Conditions / Price Drivers:
Increasingly high Asian gas demand is causing diversions of LNG that were bound for Europe to the eastern part of the world. Temperatures remain around average now for the time of year so there has been a slight dip from the last couple of weeks, which has enticed an increase in demand.
Carbon prices have remained volatile throughout the last couple of weeks, spiking and troughing in the same way as gas and electricity contracts, which remain under heavy influence from the allowance. Carbon had fallen in the recent days but is trading strongly still and is likely to remain high with new legislation from EU government being released with regards to how countries are to reduce their emissions by 55% on 1990 levels by 2030.
Gas storage stocks remain weak and continue to be the main upward driver for pricing with winter only around the corner now. Storage injections are expected to remain low over the coming months which will keep prices elevated as Asian demand is expected to remain high and now we are observing the effect of this further out in the market also. The longer the situation surrounding storage remains as it is, the more we can expect to spill over into future periods as low stocks will pass the same risk forwards.
This information is provided by our HCC Market partners, Assured Energy, who are part of The Consultus International Group. Any information provided is given on an advisory basis and both HCC and Assured/Consultus are in no way liable for any action taken by the reader with regards to their energy purchasing.
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