01 Oct Business Energy Outlook
The energy market is extremely fluid and volatile. Whilst trends can be seen year upon year, increasingly, unforeseen geo-political issues are having a big impact. It has therefore never been a better time to take expert advice before committing to an energy contract.
The EU referendum has played a big part in market movements this year.
Forecasts for the year in January were very much a stable beginning with increasing volatility from quarter 2, as we neared the EU referendum and third party government costs were set to increase in April. After that was the unknown, dependent on the outcome and subsequently how markets would react.
The beginning of 2016 indeed saw markets at a relative low for the first few months. Many clients took advantage of this slump, with the forecast being a steady rise from the second quarter onwards.
Since April the market has increased steadily week on week, with very few dips being seen. In the lead up to the EU referendum the market spiked with uncertainty, seeing prices increase substantially from the lows earlier in the year. Indeed, businesses with quotes in February for an energy spend of approx £160k p/a saw offers increase by around £6,000 in early June.
Immediately after the out vote, markets again spiked with uncertainty with suppliers pulling quotes due to the nervousness in trading. This however, was short lived and they quickly levelled back to the comfort zone we saw in the lead up to the vote.
In the last month or so markets have remained relatively stable at this ‘safe zone’ it appears to have found.
We are now entering the October buying round where markets again rise due to high demand. The October buying round starts around June/July and continues right through to October. The term comes from when the energy market was deregulated and all energy contracts ended in October. Many businesses are unaware they can change their contract end date and therefore this still remains the busiest time of year for suppliers, with an enormous amount of demand.
From October-end of 2016 we will see winter purchasing come into play. Year after year we can see the trend of markets rising in these winter months due to low supply and high demand. Of course, should other factors come to light, such as Hinkley Point getting the go ahead/being stopped, terrorist attacks on oil production, LNG deliveries decreasing etc then these will all have an impact also.
Each year we can predict what the market will do to a certain degree, however in these uncertain times it is increasingly hard for traders and analysts to get this right. One thing we do know for sure is that over the long term the energy market is only going one way, and that is up. There will always be peaks and troughs along the way but when and where these appear is usually only apparent in hindsight.
It is increasingly important for businesses to take their energy purchasing seriously. Unless you have specific energy expertise in house, using a reputable consultant will put you in the best position for your energy procurement. They work in the markets on a daily basis and can see opportunities and trends you would not otherwise be aware of. Enabling you to purchase at the most advantageous time, rather than when suppliers tell you to.
If you would like us to review your current energy contract please email firstname.lastname@example.org