Greek financial crisis hits energy market prices

Posted on 23 Jun 2011 by The Manufacturer

Greece’s debt crisis has had a negative effect on the energy markets, pushing prices down, says npower's energy expert Magali Hodgson.

The past two weeks have seen contrasting scenarios in the energy market. The week of 6 June saw energy prices across the board trade in a bullish range. UK prices were strong as they were influenced by higher continental power and gas prices as well as the volatile German market and concerns about hydro availability on the continent. Brent crude and coal prices were also strong on the back of the news of OPEC failing to agree an increase in oil production, a weak dollar and increase in oil demand in China.

However, last week the market looked very different. The bullishness of the previous week was short-lived as news of Greece’s debt crisis and Saudi Arabia’s decision to ramp up oil production had bearish influences and sent oil prices from highs of $120 per barrel to lows of $110 per barrel. Coal prices also weakened, losing $4 in the same period.

Confidence has fallen as the IMF announces the postponement of a €12 billion aid package for Greece. The Eurozone problems will play a big part in how the markets fare over the next few weeks. If the Greek government proves that they can reform their budget before the next instalment of aid, the rescue plan will continue. If this happens the Euro should strengthen against the dollar, relieving the bearish pressure on oil. However, if Greece defaults on its debt, this is likely to cause a Eurozone-wide financial crisis which would see oil prices fall even further.

Whatever outcome the Greek crisis causes, growth in Asia and emerging countries will continue to offer support to oil prices. It is also important we keep an eye on the weather as it will affect the supply situation in both the UK and mainland Europe.