Annuals rise on general energy upturn

Monday 19th October 2020

The last fortnight has seen Annual prices move up, buoyed by a general upturn in energy. Oil increased on Donald Trump’s rapid recovery from covid symptoms, hurricane disruption in the Gulf of Mexico and the threat of Norwegian strikes. However, these increases have more or less corrected with the ever-growing expectation of a second lockdown in the UK and on the continent, with the inevitable knock-on effects on demand. Power prices have also been hit by lower carbon costs, with that index falling on the prospect of a no-deal Brexit.

Short-term prices have seen rapid increases in recent days, as wind output dropped. Whilst wind provides great value generation, when wind speeds fall, so prices increase as predominantly gas is sought to fill the shortfall. When there are concurrent gas supply issues (like strike action or maintenance issues), prices spike, with Day-ahead power hitting a 20-month high last week. Such volatility is likely to become more commonplace as the renewables mix increases.