Despite it being a tumultuous month for domestic politics, the weather played a significant role in market movement over the past few weeks. Overall, there was a 13% decrease on Summer23 prices, and 7% decrease for Winter23.
The gas market has been the main market driver for electricity prices through the last few months. Uncertainty on the balance of gas supply and demand remains priced into the market for Q1 onwards. The key events for the gas (and therefore electricity) market this month are detailed below.
October has been dominated by mild but windy weather; increased renewable output coupled with low gas heating demand depressed the gas market.
A few notable events caused short-lasting rises. Unplanned outages on the Norwegian system in early October, and instability in the UK Government and the resignation of former Prime Minister Liz Truss were key events.
Yet, the windy weather has allowed for increased gas injection throughout the continent – with European gas reserves filled to 95% capacity. Whilst this has removed a significant proportion from risk premiums in the near-term market, a large amount of uncertainty remains for the start of 2023. Current European gas storage levels would provide only 2-3 of grace on supply in a tight system; and only 10 days of supply in the UK. There are no longer any Russian gas flows from the Nordstream or Yamal pipelines; Russia cite damage and maintenance and the cause of the downtime. Whilst Russian flows continue through Ukraine via the Velke pipeline, rumours swirl that these flows will also cease in the near future.
Currently, Europe is a premium market to LNG, outbidding Asia for a large volume of cargoes, supporting Europe’s gas needs. LNG supplies to Europe are already 130% higher than they were for the whole of 2021. However, the impact of the coming winter, and potential COVID outbreaks, on the LNG market remains to be seen.
Overall, the market continues to be tight, volatile, and responsive. Any drops in temperature in the coming weeks, or significant developments in the war in Ukraine, will be keenly felt.
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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