Energy prices are currently volatile due to the situation in Iran, but the UK is less exposed than it may seem, as most of our gas comes from Norway and the US.
While global prices are affected, supply routes remain largely intact, and demand for gas should ease over Summer as renewable energy increases.
Our view is that the recent price spikes are more of a short-term reaction and should settle in the coming weeks or months.
Our advice: Avoid locking into inflated long-term contracts unless necessary. For contracts that are expiring fairly soon, out-of-contract rates or a short-term deal to get through this period would be a good consideration.
Ultimately, the right approach depends on your appetite for risk.
On the Generation front prices have risen to £101.90/MWh, compared to £94.32/MWh in the previous week.
At 42.7% renewables are still showing up as the main driver, followed by fossil fuels at 22.5%.
| Gas: Gas prices rose yesterday, tracking the significant gains in the oil markets as long term disruptions were priced into the risk premiums. Ukraine’s recent attacks on Russia have halted 40% of energy export capacity. Prices have continued to rise in this morning’s early trading window. Power: Bullishness in the wider energy complex has continued to support power prices. Prices are being driven by the flow of geopolitical developments. This morning, prices have continued to rise, tracking the gas markets. Oil: Oil prices settled up 6% yesterday, rebounding on previous losses – setting Brent oil well above the $100/barrel mark. Iran has said it is reviewing the US’s proposals but has no interest in talks, whilst Houthis stand ready to strike the Red Sea waterway. Additionally, Ukraine attacks on Russia have halted 40% of Russia’s export capacity. Carbon (EUAs): The ICE Dec-26 rose to €71.65/t yesterday. The contract opened this morning at €71.26/t. Carbon (UKAs): The ICE Dec-26 closed at £38.00/t last night. Opening this morning at £38.04/t. |
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