November 2021
Market Summary
A worldwide gas supply shortage compounded by Russian/EU politics has caused a surge in prices in recent months, leaving energy intensive industries and suppliers in the UK struggling.
Russia, who normally supply more than a third of the EU’s gas have still not reached pre-pandemic levels. The controversial but potentially vital new Nord Stream 2 gas pipeline from Russia to Europe has come up against another stumbling block this week, as Germany paused the certification process. Traders and analysts now expect its start-up will be deferred to the second half of next year. We believe once the pipeline has passed its certification, we should expect large downward corrections in the market.
To combat this issue, the UK has held talks with Qatar over a long-term gas arrangement that would make the Gulf state a “supplier of last resort”, according to people briefed on the discussions. Such a deal would help ensure a stable source of LNG from Qatar even when global supplies are tight.
Carbon Spot Prices
This month we have seen all time high prices reaching €75/tonne owing to the COP 26 summit. Germany announced new plans to exit the use of coal to 2030 from their previous target of 2038, and to introduce a minimum domestic carbon price of €60/tonne if a floor price cannot be implemented EU wide.
Electric Market
It’s been another volatile month with short-term electricity (December 21) prices reaching as low as £184 MWh before prices escalated again to trade at £273 MWh. The high carbon trading has put increased pressure on the forward curve power prices.
Gas Market
It’s been a similar story for gas, with short-term gas prices for December 21 hitting 184.75 p/therm before a sharp increase to 238p/therm (8.12p/kWh). The current cold weather snap has caused prices to increase by 4.5% (29/11/21) following the spike in domestic heating use.
EPEX Price
We buy power for our flexible contracts on EPEX which is a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed term contract over eg a 12-month period whilst prices are so high. As the markets fall so will the price of energy for clients on this kind of arrangement.
The EPEX price is currently 18.19 p/kWh (commodity) for November which will total 25 p/kWh+ for the overall price with the non-commodity added to it. The EU price has outperformed the GB market this month.
High winds should improve renewable energy supply and reduce the impact of the snow on the short-term market pricing.
During the Christmas period there should be lower commercial and industrial demand owing to bank holiday closures which should ease the monthly average prices.
Oil Market
Oil has been volatile during November reaching highs of $85.56 per barrel. Over the past couple of weeks prices have decreased by 9% reaching $77.95 following the news of potential lockdowns in the EU which could result in a surplus of supply.
