Oil prices have soared over the last few days as oil-rich countries announce unexpected cuts to crude output to try to drive demand in a stuttering global economy. The biggest impact will be on transport costs as we could see a rise in the price of fuel again. It could also potentially put more pressure on inflation which would worsen the cost-of-living crisis and raise the risk of recession.
This should not have a major impact on gas and electricity prices which continued to stabilise during March thanks to good LNG imports, high European gas storage levels and decent wind generation.
Unfortunately, the new Energy Bill Discount Scheme which replaces the Energy Bill Relief Scheme will impact future energy bills for many. The Scheme running from 1st April 2023 to 31st March 2024 provides significantly less support than the previous scheme to businesses and households. Energy-intensive industries can apply before the end of June for additional support with their costs.
Other activities which affected the energy market in March included cracks in EDF’s nuclear fleet, causing prices to fluctuate briefly. EDF has also launched its first solar farms in Ireland which are predicted to produce 17MW that could power up to 6,000 homes.
The U.S Freeport Liquified Natural Gas (LNG) facility is still only running at 2/3rds of its capacity due to an electrical fault.
Electricity and Gas Prices
Overall, prices are experiencing an ongoing downward trend although the below-seasonal temperature we saw last week caused an increase.
The snow blizzards seen in early March also caused prices to rise as the demand for gas increased. Prompt gas prices were affected more than the forward curve as the weather was expected to pass relatively quickly. The results were ‘prompt’ - 28 p/therm (+24%) and ‘forward curve’ - 11 p/therm (+9%) within a day.
Last week curve gas prices dipped below 100 p/therm a few times but are currently trading at the mid-100 p/therm mark.
Electricity curve prices are yet to reach the £100 MWh mark and below. The day-ahead prices have been performing relatively well, trading less than curve pricing probably due to the expectation of better weather as the winter comes to an end.
European gas storage is at record highs and should reach its target capacity, which ought to drain the risk out of the winter 2023 price.
Flexible Purchasing - EPEX Price
The EPEX price currently is 11.12 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 23 p/kWh+.
The cold weather at the beginning of March increased coal generation which consequently pushed up carbon prices.
Prices rose 9% from €91 to €100 per tonne before quickly dropping back down to €84 per tonne.
Brent crude prices have risen by more than 5% to above $84 a barrel after Saudi Arabia, Iraq and several Gulf states announced they were cutting output by more than one million barrels of oil a day. Russia has also said it will extend its cut of half a million barrels per day until the end of the year.
Brent had fallen last month towards $70 a barrel, the lowest in 15 months, on concerns that a global banking crisis and rising interest rates would hit demand.
UK Decarbonisation Strategy
The UK government has published its decarbonisation plans to achieve Net Zero by 2050. The new ‘Powering up Britain’ energy plan was released on Thursday to strong criticism from environmental groups.
The UK’s strict carbon regulations have put additional financial pressure on some manufacturers who have had to absorb the high costs of carbon credits, making them uncompetitive. It is expected that the government will announce a consultation on a new system of carbon border taxes to protect them from countries with lax environmental rules.
Climate Change Agreements (CCAs) have been extended by the government for two years until March 2025. The extension to the scheme provides an opportunity for eligible businesses to participate in the scheme and contribute towards the reduction of global carbon emissions in return for a portion of tax relief. Energy-intensive sectors can receive up to 90% Climate Change Levy (CCL) relief, which can increase to 100% for those within the mineralogical and metallurgical sectors.
Business Energy Support
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