UK gas prices recorded significant price gains during August. Gas prices rose 18.5% to 3.46 p/kWh after a German court ruling that the Nord Stream 2 (NS2) gas pipeline link with Russia must comply with EU rules requiring the owners of pipelines to be different from the suppliers of the gas that flows through them. This could delay the start of the Nord Stream 2 gas pipeline to Europe. European gas storages are still only 69% full, compared to 90% last year. This continues to be the largest supply risk ahead of the colder winter period.

Power prices also posted significant gains last month, rising 16.9% to 10.22 p/kWh, tracking gas prices. Prices for both gas and power continue to be supported by high levels of tender activity in the run up to the 1 Oct renewal date. With only 5 weeks to go, there is very little time for customers to lock out their 2021 supply contracts. In related markets, Renewable Energy Guarantee of Origin (REGO) prices have jumped to a premium of c. 0.23 p/kWh, around 5x higher than in January 2021.

Carbon recorded a 13.9% increase in European prices to €60.76/tCO2, as reduced auctions and a rise in gas prices, following a reduction in global supply due to the forecasted closures in the Gulf of Mexico, led to a jump in EUA prices. Brent crude oil prices moved 4.4% lower to $72.99/bbl, reflecting concerns that travel restrictions to curb the spread of the Delta variant of Covid-19 will derail the global recovery in energy demand.

Concerns over EU gas storage and carbon means prices continue to climb. With just 1 month remaining for businesses to lock in their 1 Oct 2021 renewals, the increase in contracts being locked in is likely to drive prices higher in the short term.

Clients with 2021 renewals should already be discussing their renewal with their account manager, with a view to scheduling auctions over the next week or so. But keep in mind that this period is the busiest tender period for suppliers, so particiation may be impacted.