August 2023 Energy Market BriefPrices Still Remain Sensitive To Fluctuation

August 2023 Energy Market Brief

Annual Gas Prices

Annual Power Prices

Opposing the trend experienced across the previous reporting period, shorter-dated contracts registered month-on-month losses. This further emphasises the overall price decrease registered across wholesale prices in 2023 when compared to the significant highs of 2022.

While it is important to highlight how far wholesale prices have fallen from the peaks across 2022, it is important to acknowledge that prices still remain sensitive to fluctuations, particularly as we move closer to the second winter without Russian energy exports. Elsewhere, prices in the latter half of the month registered an increase – finding support from reduced supply from the UK Continental Shelf, in tandem with reduced LNG flows to GB shores.

Across July, day-ahead gas registered a 8.3% loss month-on-month to average 72.45p/th. Similarly, front-month contracts registered price drops, down on average by 9.2% when compared to June, with August 2023 seeing a 8.8% loss to 73.39p/th, and September 2023 shrinking 9.7% to 77.74p/th.

Opposing the front-month contracts, seasonal gas contracts registered gains, up on average by 5.2% – amid uncertainty towards future procurement. Currently, EU gas storage levels sit at approximately 85% at the time of writing – leading to the winter 2023 contract experiencing weaker growth than the other contracts at 0.5% month-on-month.

While on track to exceed the 90% storage target for November, the extent of supply certainty during, and post, winter 2023 will be dependent on winter demand profiles in Europe and South-East Asia, the extent of which will remain uncertain for months to come.

Following the bearish pricing sentiment experienced across their day-ahead gas counterpart, day-ahead power prices fell 5.5% to average £81.90/MWh in July. However, this reduction was weakened following periods of decreased wind generation seen during the latter half of the month – tightening system margins.

Overall, seasonal power prices registered mixed movements, with winter 2023 and summer 2025 falling, and summer 2024 and winter 2024 growing. Coincidentally, both movements averaged 2.6%, leading to no net movement across seasonal baseload contracts as a whole.

Winter 2024 overtook winter 2023 as the premium market, averaging £129.14/MWh, amid future supply uncertainty.

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