Last Month Summary

UK gas prices posted further price gains during May. Gas prices rose 5.3% to 2.19 p/kWh as gas supply from Norway and the rest of Europe was hindered by cross-border disruptions and maintenence outages. The European storage surplus triggered by Covid-19 peaked near 30 bcm vs the five-year average last spring but now stands at a 13 bcm deficit, sitting at just 36% of maximum capacity. In the UK, gas storage is just 8% full.

Power prices also continued to climb significantly last month, gaining 6.9% to 7.53 p/kWh. This is primarily driven by the meteoric rise in EU carbon and gas concerns. As gas shortages stretch across the EU, power providers have no choice but to use coal as a source of generation.

Carbon recorded a 6.2% increase in European prices to €51.76/tCO2, following further EU talks about plans to meet ambitious climate target. However, carbon prices torwards the end of the month started to stablise, potentially signalling a smaller reversal. Brent crude oil prices moved 3.3% higher to $69.46/bbl, as OPEC predicts an increase in economic activity as the Covid vaccine rollout continues.

Recommendations

Concerns over EU gas storage and carbon prices means here’s a lot of uncertainty over price movement. However, what the month-on-month price movement doesn’t clearly show is that prices have declined over the last 10 days as carbon prices stablise.

If prices do slide over the next 1-2 months it makes sense that clients should already be discussing their renewal with their account manager, with a view to scheduling auctions for July or August. But keep in mind that this period is the busiest tender period for suppliers, so particiation may be impacted.

Beond Rolling Annual Indices since Jan-07

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

Download

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.