What’s driven market prices in recent months?

Market volatility has continued over the past 3 months, with growing concerns over Russian gas supply and French nuclear availability this winter stoking further uncertainty.

Big Zero Report 2022

Image: EDF Energy

We’ve seen the Winter 22 UK power price surge to fresh highs of over £340/MWh, but what has driven the market over the past few months?

  • Fundamentals were weak over April and May, with mild weather, strong LNG imports and stable Russian supply helping European gas storage fill up at an impressive rate.
    • European gas storage has filled to over 57% as of 28 June, exceeding expectations, however injection rates will have to remain strong over Q3 to reach 80-90% by early winter.
    • LNG supply has been ‘trapped’ in the UK with strong supply flooding into the country amid excess LNG regasification infrastructure, whilst the lack of storage capacity has led to maximum interconnector exports to Europe. This has led to UK prompt and near-curve prices trading at a sharp discount to Europe and within-day gas trading as low as 0p/th.
  • Russian flows have been unreliable over June with the latest cut meaning Nord Stream 1 flows are at just 40% of capacity, with risk of flows dropping further, adding significant risk premium to Winter 22.
  • French nuclear availability concerns going into this winter has further buoyed prices.

There is a lot of market uncertainty with heightened concerns that Russian gas supply could be cut off completely.  Volatility and illiquidity is likely to remain for the foreseeable future, whilst politics is also continuing to play a key role in driving the market fundamental outlook.

With so much going on across the energy market, 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?

Join our free bi-monthly webinars on the UK Power Market with James Chaplin, Energy Trader in the Portfolio Hedging team.

The next one is coming soon, on 20 July 2022 at 11am. 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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