Gas and Electricity Year Ahead Wholesale costs are higher than those in last week’s report. They show good value compared to most of 2021 / 2022 / 2023 but are still double those in 2020. Oil is also slightly higher.
Last week demonstrated how supply concerns are adding a premium to Wholesale prices. It was reported that Ukraine and Azerbaijan had agreed a Gas transit deal which would have helped offset the reduced supplies from Russia when the contract with Ukraine ends later this year. This resulted in the Wholesales Gas price falling 7% and Electricity 6% in one day. As news broke that no deal had been made, they moved higher.
Pressures also include the increase in tensions in the Middle East, adding to concerns that there could be disruption to Gas and Oil from the region. LNG shipments to Europe remain low as they are attracted to Asia where there is price premium. Temperatures in the UK are below seasonal norm, adding to Gas demand for heating. Despite the above, there is a degree of confidence for Gas supplies this winter as EU Storage levels are 94% full, already above the 90% target set for November and are likely to reach 100%.
The last week saw Wind generation fall to just 15% of supplies, which required the additional use of Gas at 30% and 19% from our Interconnectors with Europe. The UK’s last Coal power plant will close this month.
Some of the threats to supplies may not materialise and the more positive outlook may return, but due to the risks, we would encourage customers that have Gas or Electricity contracts ending in 2024 and potentially early 2025, to discuss options with Indigo Swan and closely monitor the position.
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