Whilst Annuals generally moved lower in the second half of July, with October ’20 power losing most of the value gained since mid-June, the short-term market has been more robust. Annuals fell in line with carbon, dropping back sharply from recent peaks as the expectation of a slower post-covid recovery materialised. There have also been indications that the generation squeeze for the coming winter will not be as pronounced as first feared, particularly if the recovery slows, local lockdowns increase and demand drops. In the last day or so there has been some more Annual bullishness, with Brent crude breaking out of its recent range and US gas production decreasing to add positive sentiment.

Short-term has generally been less volatile since mid-July, with good renewable (wind and solar) output across the UK and continental Europe. However, short-term gas in particular is now up as sustained high temperatures are expected across wide areas of Europe. As is often the case, prolonged European heatwaves lead to increased cooling demand, but inland nuclear facilities’ cooling capacity is compromised by lower river levels. With nuclear running at reduced levels, so gas generation is increased to fill the void and power innumerable air-conditioning units – September month-ahead gas is thus up 45% since mid-July.  

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