The last fortnight has seen generally bullish gas and power markets for the UK and across Europe. The key driver has been general optimism surrounding the vaccine roll out, as well as lockdown restrictions being eased. This has the potential to increase demand as businesses open up and people start to get out.

There has also been upward pressure from the wider energy complex, as oil shows a 20% increase in the space of a month. There have also been support from a tightness in generation capacity – gas flows were down on a Norwegian strike; wind levels dropped cutting generation; France anticipates generation shortfalls in Q1 ’21, meaning UK exports to France will increase. At the same time the weather cooled, increasing demand on the system. In the last couple of days, the rally seems to have stalled and started to retract, in part due to the low cost of US gas - American LNG is part of Europe’s energy mix like never before.  

The direction of markets over the coming weeks and months will depend greatly on geopolitical events: the Brexit talks are apparently on a knife-edge, which potentially impacts currency and thus energy import costs; what will post-covid demand look like, and when will we even be post-covid?

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