After another miserable period for wholesale with further surges, there was finally some respite towards the end of last week. Wholesale power saw a sharp downturn based on the EU indication that different generation types would be decoupled in determining the final wholesale electricity cost. Essentially this means that power will be less affected by the current lack of gas and prices should stabilise. There is little detail at this stage, but ultimately there should be less volatility and extreme prices like we are currently experiencing. It also seems likely that the UK would adopt a similar policy.

After being spooked by more closure threats surrounding the Nord Stream pipeline, gas too fell last week. Gas pricing has also been dragged lower by encouraging levels of European storage, nearing winter targets. However, since the attached was drafted, there has been more bullishness and an upturn, with the 3-day planned maintenance of Nord Stream extended due to apparent compressor issues (as indicated by Russia). It seems highly likely that the delayed return is linked to the wider Ukraine situation, with Russia again accused of weaponising energy and not fulfilling contract commitments. Nervousness has thus returned to markets as everyone eagerly awaits Russia’s next move. Last week’s falls are however encouraging as they prove what can still happen (i.e. a sharp correction) after what has been fairly relentless increases across gas and power.

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