“Many businesses will be concerned about how the drone attacks on Saudi Arabia’s Aramco oil processing facilities will affect their energy prices, but the impact on business’ energy bills is likely to be limited.
The attacks have had an inevitable impact on the market, as Saudi production capacity has been cut by around 5.7 million barrels per day, which means our global supply has been curbed by over 5%. This pushed oil prices to their highest level in four months. However, prices are already falling again, as Aramco has confirmed that vessel loading has resumed and President Trump has authorised a release from US strategic oil reserves.
UK energy prices are also less vulnerable to incidents like these now that only 10% European long-term gas supply contracts are index-linked to oil prices. Our gas and power prices are lower than those we saw early last week, when EDF confirmed issues with their nuclear reactors in France and the Dutch Government announced further reduced production from the Groningen gas field, pushing prices up by around 10%.
While businesses will have been exposed to higher future prices today, many who have flexible purchase supply agreements will be able to wait until prices fall further before buying their energy. Unexpected incidents like these emphasise the need for businesses to have a robust procurement risk strategy in place – one that suits and balances their business need with pricing goals.”
Nick Campbell, Director of Energy Intensive Clients at Inspired Energy