Aug25 Energy Market Brief
Prices Tick Up On Supply Concerns
Annual Gas Prices
Annual Power Prices
| Contrary to the movements observed in the preceding month, most tracked power and gas contracts recorded losses month-on-month. Despite the price losses, it is important to acknowledge that prices remain sensitive to change, especially as GB is more exposed to the global market for its procurement of gas. This was particularly apparent following anticipation surrounding tariff announcements by US President Donald Trump impacting the market due to Europe’s large reliance on US LNG. Similarly, reduced gas supply from the Norwegian and UK Continental Shelf across various periods of the month further solidified concerns around supply. Day-ahead gas registered a 6.2% loss month-on-month to average 80.97p/th due to demand reductions as the higher temperatures limit total heating demand. Similarly, front-month contracts registered price drops, with August 25 seeing a 8.1% loss to 84.50p/th and September 25 dropping 8.4% to 84.50p/th. Looking ahead, seasonal gas contracts from winter 25 to winter 27 were 7.1% lower, on average, in July compared to June as the net injections seen across gas storage stocks throughout continental Europe have led to reduced concerns around supply security during the upcoming winter. Likewise, on 27 July, it was announced that the European Union and the United States agreed to a trade deal of 15% on all EU goods, set to begin on 1 August. While this is lower than what Donald Trump had previously threatened, the tariffs still act to decrease industrial demand, resulting in lower price expectations moving forward due to the economic repercussions associated with the tariffs. |
| Opposing the bearish pricing movements experienced across its day-ahead gas counterpart, day-ahead power prices rose 10.9% to average £80.47/MWh in July, remaining relatively level across the month compared to the large price fluctuations seen across the month previous. Price gains were supported by a reduction in wind generation month-on-month, increasing demand for more expensive forms of fuelled generation, alongside stronger demand for cooling appliances during heatwave conditions across GB. Moreover, the outage at the Hartlepool 2 nuclear reactor, which was due to end on 14 July – was unexpectedly extended to 22 September, further reducing nuclear contribution to the generation mix. However, both front-month power contracts registered losses, as August 25 fell 3.6% to £74.18/MWh, and September 25 dropped 5.8% to £79.78/MWh. Seasonal power prices saw an overall downward movement too, falling 3.9% on average, with winter 25 dropping 3.3% to £84.94/MWh and summer 26 falling 1.7% to £72.65/MWh. Brent crude oil remained relatively level compared to June, averaging $69.36/bl, down 0.6%. Prices found bearish influence on 7 July following the OPEC+ alliance announcing it would increase production by 548,000 barrels per day in August, which was higher than expected amongst market participants. Stronger losses were limited by drone attacks on oil fields in Iraq, coupled with EU sanctions placing a ban on all imports via the Nord Stream 1 and 2 pipeline and including a lower oil price cap. On 18 July, the UK and EU announced a lowering of the crude oil price cap from $60/barrel to $47.60, with an aim to drive down the market value of Russian oil. Downward movements were also recorded across both UK and EU ETS carbon prices, with the EU ETS down 3.0% to average €70.99/t, and the UK ETS falling 4.0% to average £49.20/t as the EU proposed formal negotiations to link the EU and UK ETS. This followed a period of uncertainty on the market linkage, with EU/UK carbon prices diverging over the month. The announcement provided bearish signals, particularly in the UK market. |
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