We saw a competitive LNG supply market along with cold weather driving up gas prices in January this year, whilst a tight UK power market led to prompt volatility. But what has caused prices to continue up as we enter summer?

• European gas storage levels have been left depleted after winter, with unseasonably cold weather and low renewable output in April requiring further withdrawals. Storage levels currently stand at c.29% full, compared to 59% in 2020 and 45% in 2019.
  • Although LNG supply has ramped up over the past few months, uncertainty still remains over summer with potential competition for supply between Europe and Asia.
  • Nord Stream 2 completion remains uncertain, with lower pipeline flows putting more pressure on gas storage to fill up this summer.
  • Rising Russia/Ukraine tensions has also added geopolitical risk to gas supplies into Europe.

• Carbon has been on a bull run from early November due to the expectation of further regulation to tighten the market. Both the EU and UK have set more ambitious emission cut targets, with their respective emission trading schemes seen as a primary way to drive the change.
  • Additional uncertainty remains to how the market will react at the start of the UK carbon scheme on 19 May.

As always many uncertainties remain in the forward market outlook, especially with focus shifting to more global supply/demand factors. Close attention will likely be paid to gas flows and storage levels over this summer, in addition to nuclear availability, as market participants weight the likelihood of potential tightness in the winter to come.

These points only scratch the surface of the current market drivers, so I’m sure you are wondering how you can stay on top of the wholesale energy price as it changes, especially in uncertain times like these?

Energy is a complex business, but hopefully we can make it simpler. You can keep informed on the changing prices through us at EDF. Join our free bi-monthly webinars on the UK Power Market with James Chaplin, Power & Gas Trader in the Portfolio Hedging team.

The next one is coming soon, on 5 May 2021 at 3pm. Don’t miss out! Sign up here.

In the meantime, watch James run through the factors that influence the wholesale price of power – what they are, how they work, and what to look for – in more detail.

This is a promoted article.