January 2022
Market Summary
Power and gas markets have been extremely volatile due to the tensions between Russia and Ukraine. If Russia does invade Ukraine, the UK and US are proposing sanctions on the Nord Stream 2 pipeline which is a main European gas supply.
Last week also saw the start of some planned Norwegian maintenance in the North Sea which has reduced output.
The arrival of over 31 LNG cargoes is the silver lining that is helping to keep a lid on price rises this month. Despite that, EU gas storage is sitting at 47.5% capacity which is lower than the “Beast from the East” in 2018. A further surplus of LNG expected in February should see gas storage remain between 35-40%.
The mild weather so far this year has helped the gas storage situation and if these weather patterns continue, we can expect prices to be stable.
Generally, gas and power markets have been bearish over the past month which has meant that suppliers have been able to quote instead of declining to quote which we saw in December.
Carbon Spot Prices
Carbon prices have been on the rise following the use of coal power stations propping up the lack of gas reserves. This month we have seen prices hitting all-time highs reaching €90.30/tonne. With the worrying rise of power and gas over the past couple of months, analysts were expecting the government to intervene to increase the supply of carbon credits to lower the price but they didn’t as it goes against the UKs Road to Net Zero.
Electricity Market
The electricity market has continued to fluctuate with short-term electricity prices trading between £184 MWh and £390 MWh before reaching £200 MWh for February. The mild weather helped to reduce prices by 32% since the beginning of the month.
Gas Market
Over the past couple of months we have seen short-term February gas prices swing from 195 p/therm to 430 p/therm before trading at 219p/therm (7.47p/kWh).
EPEX Price
Our flexible purchasing customers are buying on EPEX which is a European auction for power. As they are auctioning every hour of each day, we have put these customers on this product so essentially the customers are getting “market average” price instead of securing all 12 Months of volume at these unprecedented rates. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.
The EPEX price currently for November is 18.32 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 25 p/kWh+. The EU price has outperformed the GB market this month.
Oil Market
Oil prices are showing signs of overheating as traders anticipate a major shortage of petroleum this year owing to low stock and a limited capacity to raise production in the short term.
Prices have recently increased a staggering 18% since December reaching highs of $91 per barrel. This bullish trend has been the result of OPEC+ restraining output into mid-2021, and Saudi Arabia looking to remove another 1 million barrels per day from the market.
Global consumption is growing rapidly because of the recovery from the pandemic, with much of it focused on energy-intensive manufacturing and freight transport.
The escalating confrontation between Russia and NATO has the potential to disrupt oil exports, while the easing of quarantines is likely to boost aviation-related consumption which will impact on the situation further.