Annual wholesale prices have increased by more than £5/Mwh in the first 2 weeks of June, day ahead prices from March to date have increased between 18% and 30% across gas and power markets with coal rising over 9% in the same period. Overall the market has reached an 8 month high in the UK with European pricing following the same sentiment.

Much of the increase is linked to the gathering of pace with improved industrial activity - with Eurozone industrial activity up by 0.8%.

The nature of the global energy market is also having a bearing on increasing prices, a coal train derailment in Australia and the 6 month drilling ban in the Gulf of Mexico are assisting the overall price increase. News of an excessive hurricane season in the Gulf of Mexico is further adding to increased price fears and the bullish sentiment.

The UK is served by a Norweign gas pipeline where employee unrest and the chance of strikes is adding to supply uncertainty. This pipeline connecting the UK, Norway and Germany is due to come off maintenance in the coming weeks at which point gas may be directed back towards Europe, this will again provide a chance for a further increase in UK prices. The continued closure of the Norway-German pipeline is meaning that the UK are exporting more energy out to Europe through the UK-Belgium interconnector.

Orchard are actively looking at contracts as far out as October 2011 to ensure that purchasing strategies are put into place and businesses do not suffer form the increasing prices. Orchard have worked with our clients closely through the recession and want to ensure that our clients businesses do not suffer from the increasing prices which could have a further negative effect on their business.

Contact our Pricing Analysts for further information.