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Gas oversupply impacts wholesale power prices

LNG Industry,

Wholesale power prices have hit another four-year low with gas oversupply, ICIS reports.

ICIS has highlighted the continued fall in UK wholesale energy prices, shown by the ICIS Power Index (IPI) reaching its lowest point ever. ICIS' analysis of trends during 1Q15 details how global energy markets are having more impact on the UK, pulling down prices.

LNG oversupply

The IPI, which reflects wholesale power prices over a year of delivery, shows that electricity prices have averaged their lowest in four years during the first quarter of the year. ICIS analysts say that this is a result of continued gas oversupply, with rising production of LNG around the world and more coming to the UK, as well as the influence of other global markets such as Brent crude oil and coal.

Wholesale power prices have declined to their lowest point since the start of IPI calculation in 2011, hitting its lowest level to date on 26 January at £43.573/MWh.

Short term price drop

For 1Q15 as a whole, the IPI averaged £45.10/MWh, 10% less than the IPI's average for 4Q14 of £50.40/MWh, reflecting how prices have fallen over the shorter term.

The average for the first quarter was also 6% lower than the lowest previous quarterly average since the IPI's first calculation, in 3Q12.

Macroeconomic factors

Zoe Double, Head of Power, ICIS, explained: "Wholesale energy market prices are under increasing pressure from macroeconomic factors. The UK is now part of a truly global gas market with more liquefied natural gas availability, and oversupply on energy markets elsewhere in the world is having an impact on wholesale energy prices here, with the fall of Brent crude oil and lower coal values."

The most recent analysis shows that the trend of increased LNG imports is likely to continue, and macroeconomic indicators are also pressuring UK energy prices.

Adapted from press release by Katie Woodward

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