Last Month Summary

UK gas prices soared during September, hitting all time highs. Gas prices rose 70.2% to 5.89 p/kWh, while Electricity prices posted unprecedented gains of 62.4% to 16.59%. At the heart of the energy rally is the cost of natural gas. Prices continue to surge higher as flows from top suppliers Russia and Norway have been limited. Cargoes of liquefied natural gas are being redirected to Asia, leaving the UK and the rest of Europe struggling to rebuild depleted storage sites a month before the heating season starts.

The UK can’t count on its nuclear fleet either. EDF is reporting five nuclear units currently offline, removing about 3,000 MW from available generation. An unplanned halt at one unit and extended maintenance at two others have reduced expected supply. By 2024 five of the UK’s eight nuclear plants will be halted permanently.

Carbon recorded a 1.6% increase in European prices to €61.69/tCO2, as gas shortages have resulted in European markets turning on mothballed coal generation. Brent crude oil prices moved 7.6% higher to $78.52/bbl, supported by growing fuel demand and a draw in U.S. crude inventories as production remained hampered in the Gulf of Mexico after two hurricanes.

Recommendations

Concerns over EU gas storage and massive gas demand in Asia means it is likely prices will head even high in the short to medium-term. Clients with energy supply contracts renewing betwee now and 1 Apr 2022 should consider locking in their renewals urgently.

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 October 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.