Gas spikes up, much like power

Wednesday 2nd August 2023

There has been a fair degree of volatility in the past fortnight across gas and power. The UK weather conditions (the non-summer) has given some short-term bearishness to prices – unseasonal, high wind output has provided a large volume of electricity generation, which of course decreases gas-fired demand. However, the continental heatwave has led to continued export of power (and gas) to lucrative EU markets, putting upward pressure on price. This is not a typical summer pattern where warmer, still UK conditions would generally prompt power imports from France.

Overall, the signs generally indicate a downturn in prices, with the weather here not set to change for a fortnight at least – in spite of the gloom, energy is in a sweet spot of little heating or cooling demand domestically. Other drivers remain gas storage, which on top of German indications of a cut in industrial gas demand should de-risk this market for the coming winter.