energy news

Energy market update

15th June, 2012

Energy market update

Since Christmas, the oil, gas and power markets have been uncertain. Prices were pushed up by freezing temperatures in Europe, on going worries over oil and gas supplies from the Middle East and concerns over Iran's nuclear plans.

More recently, power and gas prices have fallen, partly because the global economy is weaker than it was, but largely because of fears over debt in the Eurozone, and Greece's possible exit from the Euro. In the last few weeks, these issues have pushed equity, oil and energy prices down, with oil now 15% lower than its February peak and power and gas down 9%.

The Eurozone is still a big worry, with Greece possibly leaving the Euro and the affect that this could have on the weaker Eurozone economies of Portugal, Ireland, Italy and Spain. Lending costs in Spain have shot back up above 6% for instance. The election of a socialist government in France has also added to concerns, as it means France and Germany (the two largest Eurozone members) are now standing on opposite sides of the political spectrum with different views on how to solve the Greek issue, which could make it harder to negotiate a solution. It's likely problems in the Eurozone will carry on affecting other economies too and we've already seen the Asian economy slowdown and the UK dip back into recession.

Although oil prices have eased since the February highs, Saudi Arabia continues to produce oil at nearly 10mbpd despite a fall in demand, pushing the oversupply into reserves. We'll be keeping a close eye on the relationships between Iran and the West ahead of July's embargo on Iranian's oil supplies.

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