We have seen significant volatility in gas and power market over the last fortnight. Whilst most fundamentals affecting direction remain bullish, there have been some hints of respite and of downward correction. The key driver remains gas, or more precisely a lack of gas – the low stock replenishment of 2021, the redirection of LNG shipments to the Far East and uncertainty about Russian flows to Western Europe have all maintained gas and thus power prices. Whilst the bears took heart from the indication that the Nord Stream 2 pipeline would be commissioned at the end of August, there was no corresponding guarantee that Russia would start to pump gas in earnest. The rise in Asian LNG prices does seem to have stalled, but this market still remains the more lucrative and so the preferred destination for shipments.

Whilst markets have stepped lower from the highs of early July, this seems a very slow process, with profit-taking on the dips. In the wider energy complex there are other factors that may offer some bearishness: carbon prices did not spike last week on the EU “Fit for 55” programme, indicating that any additional cost has already been factored in; OPEC+ have agreed to increase oil production to bring prices down from recent (3-year) highs and in doing so assist the global economy in the post-COVID recovery – the direction of oil generally has an effect on gas and power, so this may offer further downward pressure, particularly when price inflation has been acknowledged.

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