August 2022 Energy Market BriefPower and Gas Prices hit all-time highs.

In July, we saw collective gains across all tracked GB gas contracts over the month on average. Volatility across the wholesale gas market remains evident, but we observed more consistent rises across contracts further out on the forward curve.

On average, seasonal gas contracts from winter 22 to summer 24 were 37.8% higher in July compared with the
previous month. The most significant average price rises concentrated across winter 22 and winter 23 (up 44.0% on average across the three seasons).

The influence of bullish near-term market fundamentals set a strong upward price direction for the forward curve to follow. The sensitive political landscape surrounding the technical outage period on Nord Stream 1 unsettled the market and traders, causing future supply concerns which ultimately fed through in the form of risk premiums being baked into longerdated contracts.

Similarly, we saw the price of Spot Asian LNG reach multi-year highs (376.44p/th) as of 11 July, its highest price on our records dating back to 2011. This provided strong price support, with LNG being the marginal price setter for gas in GB.

July saw day-ahead power prices follow their gas counterpart upwards – 47.5% higher on average to sit at £255.78/MWh. This represents a 173% rise compared to prices from the same period in 2021.

Primarily, the strong upward momentum on near-term domestic gas prices set a price direction for power prices to follow.

Prices were further supported by consistently low wind outturn and the continuation of higher levels of exports via our interconnectors to Europe, as neighbouring markets continue to observe higher power prices compared with GB.

Front-month power contracts (July and August 22) shared the price direction of their gas counterparts and day-ahead power prices, subsequently rising 34.7% on average to sit at £269.02/MWh and £335.22/MWh, respectively.

Commodity markets saw mixed price movements, a consequence of the on-going unpredictability of many international markets in recent months, with the Russia- Ukraine war continuing and recession concerns rising.

For carbon, the EU ETS fell 1.3% to average €82.61/t, whilst the UK ETS remained virtually unchanged to average £81.91/t. Elsewhere, Brent crude prices saw a decline last month, down 11.1% to average $104.54, with fears of a global recession ultimately outweighing ongoing tight supply.