Wholesale gas and electricity prices dropped again on Thursday, but the combined drops of Wednesday and Thursday have not made up for the gains on Tuesday. It is a real seesaw ride at the moment, which is best avoided if possible.
At the retail level, prices in the short term continue to be volatile, but prices in the long term still represent good value. The challenge is whether you believe the Strait of Hormuz situation will be resolved so that Qatari gas is able to flow, in which case prices will drop like a brick once it’s resolved because of the oversupply situation. It is interesting to note that Europe is still importing a lot of Russian gas, and that is only going to increase the glut when Qatar comes back on stream.
In terms of generation, prices rose in the last week, driven by the increase in the wholesale gas price. As I keep on reminding my readers, the UK system is fundamentally flawed because the generation price is set by the single highest commodity in any given period, even if that commodity only accounts for 0.5% of total production.
| Gas: Prices fell yesterday with strong wind forecasts and above average temperatures for the remainder of the week supporting in the prompt. Further out on the curve prices fell due to, likely, profit taking after gas contracts reached multi month highs. This morning, the market is trading slightly lower than last night’s close. Power: Power price movements were once again, largely, dictated by losses in NBP gas. Above average renewable forecasts over the coming week brought further downside to prompt contracts. This morning, the market is trading slightly below last night’s settlement. Oil: Oil markets traded relatively flat yesterday. Bullishness caused by conflict in the Middle East was balanced out by signals, from Russian President Vladimir Putin, that Russia may be open to peace negotiations with Ukraine. Carbon (EUAs): The ICE Dec-26 closed at €83.53/t yesterday. The contract opened this morning at €83.46/t. Carbon (UKAs): The ICE Dec-26 traded to £59.49/t yesterday, opening this morning at £59.39/t. |
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