We’ve seen European energy prices rise and fall a huge amount this winter, reaching unprecedented highs more than once since October.
We started the winter with low storage levels and concerns over gas supply making the last quarter of 2021 highly unstable, but what’s pushed prices more recently?
The start of the new year was heavily affected by unseasonably mild weather at the end of 2021 and a strong ramp up in European LNG. The UK relied far less on EU gas storage than was expected, easing fears of that stocks would be depleted by the end of the winter. EU storage levels have reached a low of around 25%, higher than previously feared, however they remain 5% below 2021 levels and 30% below 2020.
The Russian invasion of Ukraine in February sent commodity prices soaring as supply risk over the coming months surged higher with threat of sanctions. Germany suspended certification of the Nord Stream 2 project and further sanctions were imposed by the US, removing any hope that it would ease supply concerns by next winter . Russian pipeline flows remain inline with long term booked volumes, however pressure is building for countries to take further action on energy sanctions.
As long as uncertainty remains volatility and illiquidity are likely to continue. Politics is 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 crucial in determining how tight the market could be as we approach winter 2022.
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.