August price crash sees rapid reversal
Monday 6th September 2021
We saw a dramatic crash in gas and power wholesale on 19th August on news that Russian gas flows would increase. This was great news in the face of relentless bullishness and it was hoped this would herald the start of the much needed market correction. However, it was quickly established that this was a false hope based on incorrect gas flow data, and markets have since rebounded and gone higher still.
Whilst Russian gas and below average storage remain the key drivers of sentiment across the October 2021 Annuals and beyond, there are also other factors having a bullish effect: Norwegian gas outages have adversely affected price when gas-fired generation is needed due to very low wind output; nuclear issues both in the UK and more significantly in France are reducing generation capacity further still; intermittent renewable output is seeing Day-ahead power spike well beyond £200/MWh; coal, carbon and Asian LNG are all fuelling the surge in the wider energy complex. The one bearish glimmer is that oil is not pushing higher, with Brent stabilised around the $70 marker – there is the indication that Russia may go beyond the OPEC+ quotas to up production – nevertheless, the oil price has been shored up to some extent by the effects of Hurricane Ida on US refining.