November 2022 was third warmest November on record for the UK, following on from the Autumn trend. It was a month of mixed movement, but overall, power prices for Summer23 and Winter23 increased by 14% and 10% respectively.
High levels of backwardation remains in the market; uncertainty on winter gas supply having the biggest impact on the near term. Larger decreases were seen in future contracts as gas supply risked diminish but have not disappeared.
Mainly, the liquidity is low and market risks remain high. Suppliers continue to manage, and change, their hedging and risk management strategies in response to market drivers.
The Norwegian outages ended at the start of the month, bolstering supply and calming power prices. Price decreases were supported by windy weather and mild temperatures. Reliance on gas power stations dwindled as wind and hydro output increased.
The second week of November saw mixed movement as EDF Nuclear outages were extended, impacting 8.4 GW of capacity. However, strong LNG imports and high wind speeds damped gas prices. Risk of high gas demand was priced out in the near term.
Price increases were seen more consistently after the 16th as Norwegian outages were met with temperature drops and increases in gas demand. The delayed return of French nuclear capacity caused power price increases in the near term, whilst further dated contracts saw decreases as more risk was priced out of the market.
Whilst immediate concern about the gas supply-demand balance weighs on power prices (especially in the near term), increased renewable output and mild weather are providing marginal protection from swings in the gas market. LNG supply will remain a key market driver. Europe has consistently outbid Asia in LNG cargoes since summer, but Asian demand may increase as we approach winter. Key to this will be whether COVID-19 lockdowns are relaxed in China.
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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