Well, Brexit is going to happen on the 31st January – but what does that mean for the energy markets? The UK has a Brexit transitional period to the 31st December 2020 during which time negotiations with the EU will either result in (As Noel Edmonds would say), deal or no deal!
Let us begin by wishing you all a Happy New Year!
The markets are unlikely to change over the coming months as the UK and EU tussle for position, and all the indications are that we are looking at a stable market until it becomes clearer as to whether or not a deal can be agreed in such a short period of time. In the event of some form of deal, depending on the favourability, the markets will remain constant with maybe a slight increase (depending on the extra import taxes that could be introduced to utilities), whereas a prospective no deal could see large increases to the cost of commodities, but in either eventuality there is a fair bit of a gamble in either committing to early renewal contracts now, or rolling the dice on the prospect of a favourable deal being agreed and hoping the markets and prices decline as a result.
It remains a keen time to look to renew energy contracts as strong renewable generation, milder weather, near-full storage and lower than normal seasonal demand helps keep fundamentals bearish and prices constant across Europe. Over the New Year period, Gas prices have even approached the lows seen in 2016, with UK Power prices behaving in a similar manner, generally lower over this period with the power market entering backwardation, meaning the forward price of Power is lower than the markets current spot price, making 2 and 3 year energy contracts favorable.
The worry remains that a short squeeze or sudden, unexpected news or poor weather could push pricing and volatility higher.
To find out more, get in touch with Fox Energy, the TSA’s Energy Alliance Partner on 0800 488 0915 or email [email protected]