Gas and Electricity Year Ahead Wholesale costs are lower than those in last week’s report and significantly lower than most of 2021 / 2022 / 2023, although higher than 2020. Oil remains at $69 a barrel.
The period of calm continued over the last week with just small daily price movements. However, we could see the return of previous events that caused volatility. The Middle East remains extremely tense with conflicts continuing, although the hostilities between Israel and Iran have eased and so reduced the chances of disruptions to LNG and Oil through the Strait of Hormuz. Having delayed the introduction of tariffs, the US plans to impose higher rates from the 1st of August, which could impact on energy costs, depending on the resulting change of energy use by the global economy. There is also the threat of 100% tariffs on those that trade with Russia, should no peace deal be agreed with Ukraine. If the likes of India were to stop buying cheap energy from Russia, they would need other sources, putting them in direct competition with Europe and Asia, and driving up costs.
EU Gas Storage levels are increasing very slowly. At just 65% full compared to 83% last year and with a more relaxed approach to refill targets, there is concern. If levels remain low as we head towards the winter, and if projections are for colder than average temperatures, then energy markets may start to build in a higher risk premium.
Wind generation remained low at just 15% of supplies, compared to the 27% and 28% in recent weeks. Gas was a high 28% as were Imports via the Interconnectors with Europe at 21%.
We would encourage those with energy contracts ending in the next few months and potentially further out, to engage with Indigo Swan and monitor positions closely.
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