Low storage levels to start winter and concerns over gas supply caused high volatility over Q4’21, but what has driven prices more recently?

• Unseasonably mild weather at the end of 2021 and a strong ramp up in European LNG imports weighed heavily on prices to start the new year.
  • EU gas storage was relied on far less than previously expected, erasing fears of depleted stocks to end winter.
  • EU storage levels have reached a low of c.25%, higher than previously feared, however they remain 5% below 2021 levels and 30% below 2020.
• The Russian invasion of Ukraine sent commodity prices soaring as supply risk over the coming months surged higher with threat of sanctions.
  • Hopes that Nord Stream 2 would ease supply concerns by next winter have been erased as Germany suspended certification of the project and further sanctions were imposed by the US.
  • Russian pipeline flows remain inline with long term booked volumes, however pressure is building for countries to take further action on energy sanctions.

Volatility and illiquidity is likely to continue as long as uncertainty remains, with politics playing a key role in driving the market fundamental outlook.  Supply fundamentals will be important to monitor over the coming weeks with Russian gas flows, French nuclear availability and EU gas storage levels particularly vital in determining how tight the market could be as we approach Winter 22.

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 6 April 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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