We saw unprecedented challenges to world energy prices in 2020, including Oil dropping to a minus value. There are assumptions of an uptrend for 2021 from the wider market, however our forecast and recommendation are a contrarian view.
“Be fearful when others are greedy. Be greedy when others are fearful” – Warren Buffet
Today, we are seeing many comparisons with our 2018 prediction (given 06-Jan 2018) which, again, contradicted the entire marketplace. We saw an overheated stock market which was due a major correction to bring the price of oil down and subsequently lower UK energy prices.
The US stock market correction came on 09-Feb 2018, and we made our biggest trades of the year by lunchtime that very same day. The lowest day for buying energy across an entire 450-day period. Those Groups who had spoken to us prior to the correction and taken us on as their dedicated energy consultant made significant savings.
There are generous growth forecast predictions for China and US; Governments worldwide incl Biden’s 1.9 Trillion, are providing huge stimulus; the S&P and Nasdaq at 14,000 are now at record highs; Tesla and Bitcoin have both risen 800% in just one year!!!
Oil also has strong support from the Saudi’s to keep it above $50 (now at $60) and the LNG spot prices have risen to a six-year high.
In a nutshell, the future outlook appears positive. And buyers are greedy.
So, what could possibly go wrong?
Our view is that the various markets have become over complacent. The earnings forecast is excessive, and values of stocks are overheated. There are also no allowances factored in for any oil supply and demand changes or unexpected challenges impacted further by the Covid pandemic.
There are factors which might mean the market remains Bullish (showing an upward trend and rising share prices) for some time, notably LNG and Carbon. LNG is due to supply issues in Australia and Qatar, coupled with rising demand from China and India. This causes the current spike in UK energy today (at a three-year high), which affects the gas we purchase into the UK and the price into our gas supplied power stations.
With all this at play, we see a likely sweet spot for buying/hedging UK energy prices in 2021 to be correlated to a market correction in the US stock markets and a softening of the current peak prices.
How does this help you? We can save you money!
Having supply agreements lined up or in place, either ready for a live refresh or for live trading, means we can quickly take advantage of any sweet spots from a sudden and temporary drop in UK energy prices.
Timing will be key this year so to minimise the cost increases being faced, swift and decisive action will be required.. at the right time.
With our advice, which is specific and tailored to your Group’s energy renewals, we can make sure your ducks are lined up in the proverbial row. And when the correction occurs, you can take full advantage, cap your cost increases and gain forward budget certainty.