Energy procurement: When is the price right?

The first half of June has highlighted just how challenging it can be to secure the best business energy procurement deal if you’re not armed with the right information.

Despite what the most bullish energy consultant might say, no-one can predict the future, especially not when it comes to business energy prices.

Too many factors outside the control of suppliers and brokers come into play for that to be the case, whether they are geopolitical or meterological.

However, beyond doubt, the first half of June has been a period when prices have continued to be on the up, both in terms of gas and electricity.

Despite the warm weather the UK has experienced for the majority of June, gas prices continued on an upwards trajectory. Contracts have largely been dictated by an overall strengthening across global energy markets, with oil, in particular, displaying an impressive recovery.

Storage issues

However, other fundamentals have contributed to the bullish sentiment. A strong demand for LNG supply in Asia, combined with the continent’s lucrative pricing, has reduced deliveries into the UK and Europe and impacted storage levels that are replenishing slower than previous years due to a lack of surplus supply.

Scheduled maintenance and unplanned outages have also played their part in regard to price increases this month, limiting imports into the UK. As a result, the system has seen very few periods of oversupply despite low demand for heating.

Carbon conundrum

Meanwhile, wind generation has underperformed once again this month, adding to some of the gains we have seen in recent weeks. A lack of consistent wind generation has meant that reliance on gas-fired power was unseasonably high.

The hot weather we have enjoyed this month has also increased demand for cooling across the country, creating an additional challenge for a stretched energy mix.

Rising carbon prices have played a role behind increases on the power curve too, as this makes fossil fuels such as gas, oil and coal more expensive. An unwanted variable at a time when low carbon generation sources are in limited supply.

Oiling the wheels

OPEC+ members agreed to a gradual increase in production at the start of the month which helped oil prices (both Brent Crude and WTI) to reach a two-year high.

The International Energy Agency also called for a further increase in production to help meet expected demand over the next 12 months. Some projections even expect oil demand in 2022 to be greater than 2019.

As such, the agency has called on OPEC+ to increase output by 1.4 million BPD by next year, with a number of leading analysts predicting oil to trade at $100 a barrel in 2022.

Request a callback

For all enquiries related to this article, or any of our services, call us on 01225 867722 or use the form below to arrange a callback.