Last Month Summary

UK gas prices posted strong gains during April. Gas prices jumped 18.4% to 2.05 p/kWh as UK gas storage fell to critically low levels, currently sitting at just 7.6% of maximum capacity. With the UK gas system expected to remain short over the next few days there are concerns of gas shortages, which is driving up the price. As many as 18 LNG tankers are now expected to arrive in the UK over the next week in order to maintain UK gas supply.

Power prices also continued to climb significantly last month, gaining 16.0% to 7.01 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 12.9% increase in European prices to €47.92/tCO2, as traders predicted the availability of allowances will fall in order for the EU to meet climate targets, which include reducing emissions by 55% by 2030. Brent crude oil prices moved 7.9% higher to $68.56/bbl, as OPEC released positive statements regarding global oil demand recovery following a meeting last week.

Recommendations

Bullish sentiment means prices are likely to rise higher before we see a reversal in direction. Concerns over EU gas storage and carbon prices means it won’t be a surprise if prices next month are higher once again. It is unclear when, if at all, we might see prices drop by any material quantity.

For later renewals, such as Oct 2021 and 2022, prices are beginning to decline. Prices may reverse direction and provide attractive prices around July-Aug, but there is no guarantee of that. Clients should already be discussing their renewal with their account manager, with a view to scheduling auctions for spring or summer 2021.

Beond Rolling Annual Indices since Jan-07

Beond Price Risk Report 1 May 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.