What’s sent energy prices soaring to unprecedented levels recently?

European energy prices have soared to unprecedented levels over the past few months, with gas and power supply concerns continually adding risk premium to the market. 

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A tight gas market coming into this winter was the initial cause for concern, but what has sent prices flying more recently?

  • EU gas storage struggled to refill through summer and has already seen strong withdrawals over the past few months. Stocks are down at c.60%, compared to c.80% this time last year with growing concerns that storage levels could be left depleted before the end of winter.
  • Expectations that Russia would start refilling Gazprom controlled storage sites in Europe from November was quickly priced out the market as continued low flows led to storage withdrawals, with reverse flows seen through the Mallnow pipeline on occasion.
  • The Nord Stream 2 project saw another setback with the regulator announcing that it had temporarily suspended the certification process for the $12 billion pipeline, stating the Swiss-based operator must first form a legal entity in Germany. No decision on certification is expected in the first half of 2022.
  • Recent French nuclear outages has added risk to power supply margins over the coming months, sparking a fresh surge in European power prices.

Weather forecasts over key gas demand hubs will be crucial to driving the market going forward, with volatility likely to remain. Supply fundamentals will also be important to monitor over the coming weeks with Russian gas flows, French nuclear availability and EU gas storage levels particularly vital.

With so much more going on across the energy complex 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 12 January 2022 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.

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