UK gas and power markets continue to be driven by the ongoing effects of the coronavirus lockdown. Demand is low, as you would expect with so many businesses closed. Consequently short-term markets are showing multi-year lows (Day-ahead power recently hit a 16-and-a-half year low). Renewable generation in the UK has been significant in that whilst wind levels are low, in has been very sunny for the time of year meaning solar generation is regularly outstripping gas.

By contrast, there has been a semblance of recovery in Annual prices, with most indices back to mid-March levels. The key driver for this relates to French nuclear power station maintenance for Winter 2020 and the expected additional gas demand this will bring. There has also been an upswing in European carbon costs, and glimmers of optimism as some countries look to lift lockdown restrictions (with the inevitable knock-on of increased energy demand). However, most energy fundamentals remain bearish: the OPEC production cut has not improved the Brent crude price in any meaningful way, and US WTI crude is currently below $12/barrel at a 21-year low (was over $63 on 6^th January); physical gas is abundant with LNG deliveries and remaining Winter ’19 storage available; and the expected global recession will cut energy demand and thus probably keep prices down.

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