What’s happening in the markets and why?
Today whilst countries reached a deal at the COP28 climate summit to transition away from fossil fuels in an attempt to reach global net zero emissions by 2050, the wholesale markets in the UK and Europe have seen gas and electricity prices ease week on week with some contracts at levels not seen in the last two years. Many commentators are questioning whether the energy crisis is over however it is important to note volatility is still here to stay for some time yet. At present a combination of seasonal normal temperatures, reduced demand from industry and ample supply via Norway and LNG has left storage levels at record highs for this time of the year. This has given comfort we can come out if this winter unscathed resulting in prices falling below the £100/100p level.
What should energy buyers look out for?
Continue to keep a close eye on supply/demand fundamentals, especially the weather forecasts.
What would you recommend?
With markets easing its worth looking at your energy budgets and your level of risk appetite. For some businesses with the drop in prices they may want to lock out additional volume as it provides price certainty, whilst others may seek for further price optimisation in which case holding and looking closer to delivery may be an option. If you do opt for the latter its always worth noting, whilst the risks to the upside have eased any adverse events can cause prices to spike and therefore making an informed decision is important.