December 2021 Energy Market BriefEnergy prices remain significantly elevated

In November, all tracked wholesale GB gas contracts saw prices decline, with the most pronounced losses observed in front-month contracts. Despite consistent losses across the board, gas prices remain significantly above their levels seen at the same time a year prior. However, varied fundamentals had a bearish impact on prices overall – namely increased Russian gas flows into Europe early in the month, coupled with strong wind generation and warmer temperatures mid-month.

On average, seasonal gas contracts from summer 22 to summer 24 were 4.4% lower in November than in the previous month. Despite losses on average in the month, seasonal gas contracts were 7% higher at the end of the month, compared with the start.

Wholesale power contracts remain at significantly elevated year-on-year, with day-ahead power prices enjoying growth in November, whereas prices further along the forward curve declined more broadly.

Seasonal power contracts up to and including summer 24 moved lower, down 6.2% on average in November. Summer 22 fell 4.2% to £108.58/MWh, while summer 24 dropped 13.1% to £62.28/MWh.

Longer-dated power contracts continue to be supported by their gas counterparts, along with expectations of tight margins throughout the winter season, as forecasted by National Grid ESO in their latest Winter Outlook report.