As we start a new calendar year, let’s take a look at the final month of a turbulent 2022.
Overall, December saw a decrease in both Summer23 and Winter23 pricing by c.a. 45%, despite the artic weather dominating the month. Throughout the cold snap, gas supplies were well supported by strong LNG cargoes and French Nuclear availability; fears of future supply risk were priced out of the market. It appears that strategy adopted by both Europe and the UK to ensure gas storage levels were high prevailing winter, and the continued strong LNG supply, has given the market confidence on future supply.
Season ahead prices are now on a similar level to those seen prior to the Russian invasion of Ukraine.
Weather was within seasonal norms from 01st – 08th December, however prices rose slightly due as the market anticipated the cold weather would see gas supply issues. Norwegian interconnector outages also supported power price increases.
The arctic maritime airmass arrived at the UK shores on December 08th, bringing frost, snowfall, and sub-zero temperatures. There was disruption to power supplies on Shetland following heavy snowfall, and areas of Aberdeenshire reached -17°C. Yet, despite reports of
prices reaching >£1,700/MWh on System Sell and >£2,500/MWh on EPEX spot exchange, the season pricing for Summer23 and Winter23 remained largely steady, albeit with mixed movement up to December 14th. Gas storage levels remained strong, supported by numerous LNG cargoes throughout the cold snap, easing pressure of supply concerns for the remainder of winter. Despite heavy heating demand, both EU and UK gas storage levels were ~87% full on December 12th and French Nuclear availability bolstered power supply estimates.
From December 14th, seasonal pricing decreased in expectation to the return of milder temperatures in mid-month. As the mercury rose, and the country wound down for Christmas, gas and power prices continued their downward trend. The market remained reassured at the strong gas supply seen throughout the cold snap, and risk of future supply issues were removed from seasonal pricing.
There were temporary price increases on 21st December following news of an explosion on the Urengoi-Pomary-Uzhhorod pipeline, which supplies Ukraine with Russian gas. These increases were short lived as the weather remained mild, and gas and power supply remained strong.
The Greenspan Agency produce the report on a best endeavours basis and has been supplied for your interest; the facts in this report are for background information and should not be relied upon exclusively for decision making.
If you have any queries about the content in this report, please contact amy@greenspanenergy.com or lara@greenspanenergy.com.
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