June 2017 was relatively warm and dry, with the country experiencing a hot spell in the middle of the month. Despite the warmer and drier weather, prices in the Netherlands experienced only minor changes as fuel prices continued to drop, providing a counterweight against any upward pressure which might have resulted from potentially increased demand due to warmer weather.
As we forecasted last month, we did see a slight rise in market prices, but as we move into the vacation period our expectation would be that we will more likely than not see prices pull back a bit. Demand is likely to go down as the production facilities in the country either close or reduce production for the summer vacation and, assuming a typical European summer, capacity will easily be able to cover demand. From this perspective we would expect stable to falling prices along the curve. Spot prices may experience some volatility if warm weather spells lead to an increase in demand.
Barring unexpected geopolitical issues (North Korea and the issues around Qatar come to mind) we would not expect dramatic movements in electricity prices during the next few weeks.
As pointed out last month, gas prices fell over the course of June, in line with the continued fall of oil prices and the abundance of gas available in the market. Over the course of the next few weeks we would not expect this to change.
Oil prices retreated during June and although they rebounded during the first several days of July, the fact that Russia is questioning further cuts in production to support prices would seem to suggest that the current situation may very well continue over the course of the next several weeks. On the one hand, US stocks have fallen, but at the same time production from non-OPEC producers has increased.
In our last newsletter we also mentioned the issues surrounding the Rough storage facilities in the UK. It now seems as if indeed the facility is going to be retired, which may very well lead to an oversupply for the next several weeks, providing excellent purchasing opportunities. The Rough facility is to be emptied and as purchased volumes also continue to flow, at least a temporary oversupply is likely, which will pressure prices downwards.
Interesting will be how this develops once the heating season arrives. As the UK requires considerable imports and is lacking storage facilities, this situation could easily have an adverse effect on market prices as the UK cannot rely on withdrawals from storage but has to cover its needs directly in the market. This could, in our eyes, have a negative effect on Dutch gas prices, which under this scenario we would expect to go up.
Belgium power prices have effectively done nothing over the course of the last month, with prices ending at or close to the levels at which they stated.
A reduction of power prices along the curve would have been on the cards when we look at the development of fuel prices, but as noted last month capacity issues due to outfalls in France have kept prices from falling, but the situation has not been serious enough to cause prices to rise either. France however has announced that the outages at 4 nuclear reactors have been extended, therefore it is to be expected that the previous trend is likely to continue, meaning stable prices over the course of the next several weeks.
Once the capacity becomes available and seeing that fuel prices are currently attractive, we may see a pull back in Belgium electricity prices in the course of the coming few weeks, as we can also expect demand to be lacklustre in light of the beginning summer holiday period.