Energy Market Brief – January 2021

Seasonal gas contracts rose in December. Prices were supported by periods of colder weather spread across the month, acting to lift demand higher. Offsetting further gains were restrictions imposed across much of the UK in December, to combat the spread of the Coronavirus as cases rose significantly, reducing demand.

Seasonal contracts from summer 21 to summer 23 rose 7.3% on average. Winter 21 gained 9.6% to average 45.69p/th, with the summer 21 contract up 12.0% to 37.24p/th. Gas prices may find some support in the coming months with notably cold weather for the UK and Continental Europe on the horizon.

This could be offset by the UK entering a fresh six-week lockdown announced 4 January, which could act to dampen demand with much of the population told to stay at home.

Most near-term and long-term power contracts experienced growth, acting to follow gas prices higher. Power prices also found support from periods of reduced wind generation and warnings of tight supply margins towards the month-end, similar to what has been observed in prior months, continuing recent trends.

All seasonal power contracts up to and including summer 23 rose, following seasonal gas prices higher. Demand has increased through periods of colder weather but capped by lockdown restrictions imposed later in the month.

Summer 21 lifted 10.4% to £47.45p/MWh with Winter 22 also rising, climbing 5.8% to £52.88/MWh.