January 2022 Energy Market BriefEnergy prices remain high and in a long term upwards trend.

Wholesale power contracts remain at significantly elevated levels year-on-year too, with day-ahead power prices enjoying growth in December, with prices further along the forward curve following suit.

Seasonal power contracts up to and including summer 24 moved higher, up 35.8% on average in December. Summer 22 rose 57.9% to £370.44/MWh, while summer 24 lifted 15.6% to £71.97/MWh.

The direction of longer dated power contracts will continue to take guidance from recent market developments as well as gas and underlying commodity markets, which have mixed outlooks at present. Like gas contracts, bearish fundamentals towards the end of December brought near-term prices lower, namely day-ahead power, which fell 33% by the month’s end with January 22 mirroring this trend, down 23% at the end of December.

In December, all tracked wholesale GB gas contracts saw prices rise, with the most pronounced increases observed on front-month and front-seasonal contracts. Gas prices remain significantly above their levels seen at the same time a year prior. Despite strong gains seen across gas contracts over the month, notable bearish price movements were observed at the latter stages of 2021.

On average, seasonal gas contracts from summer 22 to summer 24 were 33.7% higher in December than in the previous month. Seasonal gas contracts were 28% higher at the end of the month, compared with the start, despite lowering front-month prices at the month’s end.

Fundamentally, gas prices continue to draw on consistent bullish market dynamics, with European gas storage levels remaining significantly below last year’s volumes, anywhere between 15-20% lower based on recent trends.