Short-term gas and power markets saw a high degree of volatility as we exited September. This was driven predominantly by the position of wind in the UK’s overall electricity generation mix. Calm weather to blustery conditions off the back of hurricane systems saw wind make up none of the generation stack to 50%, sometimes within-day. This led to intermittent gas generation demand and there was also more sustained coal-fired generation to make up the shortfall. Gas itself was also adversely affected by a fire at a Norwegian LNG plant.

Prices are generally more settled now as we enter October. There is more bearish pressure due to increased C-19 infections, with the US President himself now affected. Further covid restrictions will potentially decrease energy demand further, putting more downward pressure on price. Reduced demand will in turn reduce fears over tight generation capacity for the coming winter. There has been less upward pressure on power Annuals from carbon, with the price dropping back on the realisation that allowances had perhaps been overbought. Coal offered some bullishness to markets, as the potential for a La Niña weather event caused concerns - La Niña tends to bring flooding to the larger coal-producing countries, compromising production.

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