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 higher.
The increasing tensions in the Middle East continue to add pressure to energy prices. Comments by the US that attacks on Iran’s Oil infrastructure were being discussed, in retaliation for the missile attacks against Israel, saw prices move higher. A further escalation may restrict shipments of Oil and Gas through the Strait of Hormuz and disrupt what is already a tight supply / demand balance.
It is likely that Russian Gas will stop flowing into Europe at the end of the year through Ukraine. For some countries this is an opportunity to achieve what sanctions have failed to, whilst others are concerned for their own supplies through the winter. LNG shipments remain low, being attracted to Asia by the price premium, as high temperatures require additional air cooling. Norwegian Gas maintenance is restricting supplies, but EU Storage levels are 95% full and may once again reach 100% before the higher winter demand sees withdrawals. Although this is a good position, markets will be assessing how the above factors could impact on Storage levels in 2025, especially if Europe sees an extended period of below average temperatures.
Wind generation has remained high over the last week at 29% of supplies, reducing the need for Gas at 25% and Electricity Imports from Europe at 16%. The UK’s last Coal power plant has now closed.
Some of the threats to supplies may not materialise and the more positive outlook could 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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