After the briefest correction of wholesale prices in the middle of April, the upturn returned with a vengeance with multi-year highs reached on Annuals, alongside a robust Short-term market.

There are numerous reasons why energy prices remain high, with the most obvious being the persistently cold temperatures seen in the UK and across Europe, affecting gas consumption. April turned out to be the coolest since 1922 in the UK, meaning that gas heating demand has remained a lot longer than is typical. There has also been considerably more gas-fired electricity generation than is normal for early spring due to the fact it has not been particularly windy, so renewable generation has been off. Gas demand in April means that storage replenishment for Winter 2021 has been delayed, sustaining the price into May and beyond. Gas prices have also been affected by renewed Asian LNG demand (although Indian consumption is off with the devastating effects of COVID). The influence of Russia on European gas availability has also been shown again – whilst the Russian troop withdrawal from the Ukraine border was welcomed as a de-escalation of tension, Russia exerted influence elsewhere by cutting production projections and not taking up transit capacity options.

Parallel to the increase in gas prices, power has also gained significant ground, bolstered by further rises in the carbon market. Carbon has hit €50, nearly three-times higher than this time last year. Coal is at a two-year high, and Brent crude is flirting with the $70 marker again.

With further price increases, there is a greater chance of market correction, as things are possibly overcooked, and such high prices cannot be sustained. Global energy demand will of course return post-COVID, but the situation in India, Japan and Brazil for example demonstrates that the economic recovery will not be linear.

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