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Energy Prices Hit an All Year High

June 2021

Market Summary

Short-term electricity and gas prices remain on a bullish trend and are the highest we’ve seen all year.

This is a result of several factors including low renewable energy caused by poor weather conditions putting pressure on gas reserves. This has had a knock-on effect and put gas storage shortages at an 8-year low. The UK carbon spot price has been volatile, hitting the highs of mid-May which is also causing a direct impact on power prices.

Carbon Spot Prices

Carbon prices have been trading consistently above €50, climbing closer to the €56 mark making carbon one of the hottest commodities. The steel sector in Europe is facing a €2 billion uplift in carbon costs due to the 120% rise in the commodity. It will be interesting to see how countries continue their drive to net zero with less supply of credits.

Carbon Spot Prices

Electricity Market

Electricity costs have been consistently on a bullish trend since Q4 2020 caused by the weather, pandemic, and carbon pricing with prices currently trading at the same high levels of 2008 which were a result of the financial crash.

Poor weather conditions have impacted on renewable energy generation which is down to 19%, increasing the use of more expensive fossil fuels to 53%.

Carbon’s price rallying to €56+ has also put immense pressure on commodity prices, seeing highs of £91 MWh (W21) and £63 (S22).

Power Market

Gas Market

UK gas prices have hit new highs of £85.88 p/therm (W21) and £54.02 p/therm (S22) with short term winter prices increasing by a massive 15%.

This is caused by a series of factors including the EU having the lowest gas storage in 10 years for this time of year which is impacted by Russia limiting its gas flow and Norwegian gas maintenance.

Longer term, Russia’s Nord Stream 2 gas pipeline has now been completed which will provide the EU with a much-needed gas injection of up to 110 billion cubic metres per year.

UK Gas Market

Oil Market

Oil has still been rallying, now hitting $76 per barrel as demand for fuels continues to recover amid loosening Covid-19 restrictions. Analysts are predicting that oil could reach $100 by the end of the year due to reduced reserves pushing up demand.

Global Oil Prices

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