Wholesale gas & electricity prices continued to rise on Thursday in a worrying trend.
Our view now is that prices could drop back 10% or rise a further 20% to mirror what has happened since the lows were hit at the end of February. Our underlying view remains that the market dynamics – demand, stock & supply – are all supportive of reductions but that is not being reflected in market movements.
We are now also seeing upward movement at a retail level which is more concerning as it implies that the tolerances factored in previously by suppliers, which meant retail prices didn’t track wholesale movements, have been utilised.
In terms of generation cost in the lower table the price last week was £75.27/MWh which is markedly up from the <£60 levels seen earlier in the year. Renewables last week were once again behind fossil fuel in terms of the amount of energy produced and with gas prices going up, while gas remains the primary fossil fuel, it’s understandable that the electric market has been moving upwards.
| Gas: Gas prices strengthened yesterday due to unplanned Norwegian outages in an already tightly supplied market combined with increasing gas demand due to low wind outputs. Power: Power prices rose in line with gas prices in the near curve and carbon prices in the further out curve. Low wind output led to an increased demand for gas-fired generation in the prompt. Oil: Oil prices fell yesterday as US interest rates remained higher for longer, outweighing the possibility of a tighter supply, with OPEC+ likely to continue their cuts. Carbon (EU ETS): Yesterday, the ICE Dec-24 fell slightly to €75.81/t. This morning, it is currently trading down at €75.8/t. Carbon (UKAs): The ICE Dec-24 is upwards at £44.48/t, continuing to set a new high for this year. At the time of writing, the contract has yet to open trading. |
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