Demand rises and storage falls, giving an upturn in prices

Thursday 2nd February 2023

After further falls in gas and power wholesale, we have seen an upturn this week. Last week’s cold spell affected the short-term, with gas demand increasing across Europe. Gas storage has been eaten into, but encouragingly remains well above the 5-year average. The UK has been exporting both gas and power to the continent in a reversal of what would be typical for this time of year: increased LNG deliveries to the UK have facilitated gas exports to Belgium whilst the full return of the IFA 1 electricity interconnector (affected by fire in September ’21) means that power exports to France have ramped up. This has thus boosted UK prices. Gas prices have however been somewhat stabilised by the return of the US Freeport LNG facility after the 2022 fire.

Continental decisions on nuclear generation are potentially affecting long-term cost considerations. Whilst the French are looking to build six new reactors by 2050, Germany remains robustly anti-nuclear, with the plant that was reinstated to counter Russian gas concerns still due to be switched off in April. France and to a lesser extent the UK see nuclear as an integral part of the mix for the foreseeable future, yet Germany is resolutely opposed.