Last Month Summary

UK gas prices jumped significantly during November. Gas prices soared 25.9% to 5.24 p/kWh, while Electricity prices posted even greater gains of 34.7% to 17.40 p/kWh. A colder-than-normal start to winter has made unusually large inroads into the already meagre volume of gas in storage. Previous market expectations Russia would begin large-scale gas deliveries to Europe via existing pipelines and the newly completed but not yet approved Nord Stream 2 have not been borne out. Instead the winter heating season has started with unusually low temperatures which have led to a big increase in demand for gas for heating and power generation.

Northwest Europe has been hit by repeated waves of colder-than-average temperatures over the last two months. Daily temperatures at Frankfurt airport, a proxy for the major population centres of Northwest Europe, have averaged more than 0.4°C below the long- term seasonal average since the start of October.

Carbon recorded a 26.4% increase in European prices to €74.21/tCO2, as bullish gas signals and lower wind output have increased the demand for coal-fired generation. Brent crude oil prices moved 13.0% lower to $73.44/bbl, as another wave of lockdowns could result in up to 3 million bpd of oil demand lost in Q1-22 as the Omicron variant of Covid-19 has governments worried.

Recommendations

With prices rising, clients with volume to buy during 2021 or Q1-22 may want to consider locking this in as soon as possible. While prices are already at record highs, increases concerns over winter gas supply to Europe means prices could rise even higher in December and January.

Customers renewing in summer or winter 2022 may prefer to wait, ride out the winter volatility and hope that European temperatures don’t drop below seasonal norms for too long.

Beond Rolling Annual Indices since Jan-07

Beond Price Risk Report 1 December 2021
Source: Beond Analysis, Reuters

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Disclaimer: These views and recommendations are offered for your consideration and Beond makes every effort to ensure that the data and information in this report is accurate.   However, due to the volatile and unpredictable nature of the energy markets, Beond cannot guarantee the accuracy of both the information and the recommendations provided.  Beond does not accept any responsibility for errors or misstatements, or for any direct, indirect, consequential or other loss arising from any use of this information and/or further communication in relation to this information.