Headlines:
- Gas and Electricity Wholesale prices are unchanged from last week
- Low EU Gas Storage levels continue to add pressure to energy costs
- Peace talks could still unlock additional Russian Gas supplies
Energy Overview
Gas and Electricity Year Ahead Wholesale costs are unchanged from those in last week’s report but are significantly lower than most of 2021 / 2022 / 2023, although higher than 2020. The Oil price is $66 from $65.
The status of Gas Storage remains a big influence on energy prices, with EU levels at just 45% full compared to 67% last year. The current target of 90% by November looks likely to be reduced to 83% between October and November, with 4% flexibility if prices are very high. The UK has a much lower capacity than other EU nations, which makes us vulnerable to supply disruptions and therefore price volatility. Centrica who run Rough, which represents about 50% of our potential Storage, said this may need to close unless some agreement is made with the government to provide support, which would further increase our reliance on LNG through the winter.
The EU’s intention to stop using Russian Gas by the end of 2027 would mean the need for more LNG deliveries, which could trigger increased investment by the likes of the US. It is likely that until the EU formalise this, that there will be hesitation, just in case Russia shows a willingness to enter serious peace talks with Ukraine and are rewarded with continued or increased Gas contracts, which may lower the price.
Wind’s contribution to generation over the last week was 20% from 14%. Gas, which generally sets the direction for Electricity, provided 21% from 28%. Imports from Europe via the Interconnectors were lower at 18%.
It is not clear how a number of factors will influence prices, which include peace talks, Gas storage levels, EU policy decisions and tariffs. We would encourage those with Gas and Electricity contracts that are due to end in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
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