Power prices fall, but downtrend stalls
Monday 17th July 2023
Whilst energy markets have now pretty well corrected the June surge, prices remain volatile. There are conflicting drivers at play. Short-term is losing value due to very strong renewable output in the UK – wind speeds are up and the UK is thus exporting to France. Higher wind output decreases gas generation demand and thus price. On the other hand, the reason France is importing is due to the continental heatwave – this has the consequences of increased cooling demand (air-con) and also compromised nuclear output (nuclear generator cooling is hampered by lower river levels and warmer water temperatures prompted by the heatwave).
We are also now seeing more LNG divert to Asia as prices there start to exceed Europe which potentially increases supply concerns. However, with gas storage levels well above their 5-year average for this time of year, the situation seems robust. Overall, markets remain bearish.