Last Month Summary

UK gas prices jumped significantly during December. Gas prices soared 28.3% to 6.72 p/kWh, while Electricity prices also posted gains of 13.7% to 19.78 p/kWh. Increases in prices were a response to Russia’s Yamal pipeline switching to flowing gas east after westward flows into Germany had been falling. Moscow denied that the flow switch was political amid increasing tensions over the build-up of Russian forces on the Ukraine border.

Colder weather and French nuclear outages also supported prices. Average UK temperatures fell to 1.6°C below season normal. Meanwhile, traders were preferring to take gas from stockpiles to supply European buyers and avoid paying near record-high prices. The political issue of whether Germany and the European Commission will approve Russia’s Nord Stream 2 gas pipeline remains a major risk.

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 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 severly elevated throughout 2022 and Q1-23.

Beond Rolling Annual Indices since Jan-07

Beond Price Risk Report 1 January 2022
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.