We’ve seen some positive movement in short-term UK gas prices this month, which dropped to around £1.70 per therm from the record peaks of £5 last month.
Markets positively responded to an increase in liquefied natural gas (LNG) imports, mainly from the US, and the extended COVID lockdowns in China which helped to reduce the global competition for LNG.
Earlier in the month, Russia was demanding to be paid in rouble-only gas purchases for existing contracts which spooked the market due to the concerns over Russia disrupting gas flows if their demands were not met.
The sudden halt in Russian gas flows into Poland and Bulgaria pushed up prices for a brief time but quickly crept back down following the news that Poland has enough gas storage to cope with less supply.
Meanwhile, EDF issued a statement that a few French nuclear stations are showing signs of stress corrosion which could see them being taken offline for maintenance and has consequently put a premium on winter 2022 peak prices.
The future outlook remains uncertain, with reports of high market prices possibly remaining until 2030. Encouraging global collaboration to reduce the reliance on Russia for European gas supply, ongoing investment in green sustainable energy and new gas storage rules from Germany instructing that 80% should be full by 1st October every year are some of the strategies being deployed to ease this.
Carbon Spot Prices
Carbon had been trading relatively flat for the first 2 weeks in April but grew by 12% as coal-generated electricity took over from gas following gas price increases. The outlook is that carbon will return to the high €80’s over the coming weeks. Carbon opened at €77 and has closed (as of 29/04/22) at €84 p/tonne which is a 9% increase.
ECF1! 83.52 ▲ +2.81% Dan (tradingview.com)
Electricity and Gas Prices
Electricity and gas markets have been bearish throughout April, seeing forward curve commodities experiencing downfall movements of 26% and 51% respectively. The 4-week forecast is reported to be above the seasonal norm but should fall as the weather warms up to support lower short-term prices.
Overall, prices have been favourable more recently and look positive going into May. As for the long term, prices look to remain high for winter 2022 and beyond until there’s more clarity on the Ukraine and Russia situation, gas flows and winter storage.
Our flexible purchasing customers are buying 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. 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 April is 17.83 p/kWh (commodity). With the non-commodity added to this, the overall rate will be 25 p/kWh+.
Brent crude oil has been volatile again throughout April reaching highs of $115 and lows of $98 per barrel with oil increasing overall by 2.5%.
US President Joe Biden ordered the largest oil reserve release in US history, allowing 1 million barrels a day surplus into the market to ease global fuel costs. He promised further action to boost US output to act as a bridge until the end of the year until domestic production could ramp up.
It is expected short-term prices will remain volatile following further news that Germany is no longer opposed to an embargo on Russian oil which could tighten supplies in the global crude market further.
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