UK gas prices rose during January as colder temperatures across Britain and lower Russian gas supply to Europe meant the UK gas system was fairly tight. Gas prices increased 10.6% to 7.43 p/kWh, while Electricity prices also posted smaller gains of 1.8% to 20.13 p/kWh. The Yamal pipeline was expected to revert to its normal mode of exporting west after Gazprom booked transit capacity for eight hours from 9pm on Tuesday, but after an hour of western flows early on Wednesday the pipeline switched back to eastbound flows.
Lower temperatures will increase heating demand although the increase will be outweighed by stronger wind generation with total demand forecast 57 mcm/d below seasonal normal with the UK gas system forecast 2 mcm/d short. Meanwhile, the geo-political situation between Russia and Ukraine continues to generate friction between Moscow and western powers.
Carbon recorded an 11.3% increase in European prices to €89.22/tCO2, as bullish gas signals and changeable wind output have increased the demand for coal-fired generation. Brent crude oil prices moved 13.5% higher to $90.03/bbl, after OPEC+ agreed to maintain moderate monthly production increases despite pressure to raise output more quickly.
With prices still high, clients with volume to buy during 2022 should engage with their account managers as soon as possible to setup a schedule so that your tender can be completed as quickly as possible once temperatures rise.
Even once temperatures start to rise, we don’t expect the issues around Asian and Russian gas, and European storage levels, to disappear anytime soon. As a result, prices are likely to remain elevated throughout 2022 and Q1-23.
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.