Market Summary

Energy prices rose throughout the past week and finished at their highest levels since late July. The main drivers were stalled US-Iran negotiations, a UK heatwave increasing energy demand, lower renewable generation, and reduced gas imports from Norway. With concerns over winter gas storage levels and rising inflation expectations, market sentiment remains bullish. 

As a settlement is reached in the Strait of Hormuz we are confident that prices will drop quickly to the levels seen before February when the US & Israel bombed Iran as global gas demand remains subdued vs production, driven by low demand from China as their economy continues to stutter and over capacity in LNG production.

Electricty Market Overview

• UK power prices increased strongly during the week, outperforming rises seen in France and Germany.
• Hot weather boosted cooling demand, pushing day-ahead electricity prices to their highest level since June.
• Low wind generation reduced renewable output.
• Nuclear availability remained constrained, with Hartlepool offline and a Heysham unit scheduled to go offline.
• Electricity contract prices continued to rise across all terms:
  • 12-month contracts: +6.7% week-on-week, +32.5% year-on-year.
  • 24-month contracts: +5.0% week-on-week, +25.0% year-on-year.
  • 36-month contracts: +2.2% week-on-week, +18.7% year-on-year.

Gas Market Overview

• Gas prices moved higher as supply concerns intensified.
• Norwegian gas flows fell due to extended maintenance at the Troll field and an outage at the Nyhamna processing plant.
• Higher cooling demand increased gas consumption, limiting the amount of gas available for storage ahead of winter.
• Storage levels remain below seasonal norms, adding upward pressure on prices.
• Gas contract price movements:
  • 12-month contracts: +9.9% week-on-week, +42.9% year-on-year.
  • 24-month contracts: +7.4% week-on-week, +35.8% year-on-year.
  • 36-month contracts: +4.9% week-on-week, +22.2% year-on-year.

Procurement Takeaways

• Markets remain supported by both geopolitical uncertainty and supply constraints.
• Rising electricity and gas prices suggest that delaying purchases may expose businesses to further cost increases.
• Winter supply concerns remain a key risk, particularly given lower gas storage levels and reduced import flows.
• Organisations with upcoming contract renewals should closely monitor market movements and consider risk-management strategies to limit exposure to further volatility.

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