Markets are in a state of flux. Having soared across the second part of August, we are seeing sustained bearishness now for the first time in months. There are various reasons for this change of direction – government interventions such as the proposed UK winter price cap and the EU decoupling exercise (limiting renewable generation profits). There has also been significant demand destruction – active government encouragement to cut energy demand, but also industry slowing on kWh cost and recession fears. The reliance on Russian gas has also diminished – alternatives have been sought so the associated risk is not what it was. The continued retreat of crude oil from the symbolic $100 level also helps as an anchor in the wider energy complex.

This is not to say we are on a confirmed downward trajectory now – the market remains incredibly reactive, moving higher yesterday as EDF announced delays to nuclear maintenance, for example. There is also very little market liquidity, so short-term contracts are the only option (although these contracts should be undercut by the price cap).

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