June 2023 Energy Market BriefEnergy Market Consolidates

We are continuing to see a suppressed pricing environment compared with the end of 2022, where we saw significant price highs for gas, power, and wider international commodity markets. May saw yet another notable overall decrease in wholesale price movements across all tracked commodities – with the expectation that this trend could continue further into the summer months, which typically represents the lowest demand period of the year.

Subsequently, seasonal gas contracts from winter 23 to summer 25 were, on average, 7.8% lower in May when compared to the previous month – despite periods of extensive maintenance across the Norwegian Continental shelf in the latter half of May, strongly disrupting flows into GB and consequently tightening system margins as a result.

The drop seen in Norwegian flows was offset, by strong gas storage levels across Europe – which currently sit at approximately 69% full at the time of writing. This is much higher than the 47% fullness recorded at the end of May 2022. Gas demand eased during periods of above-average temperature in the month, allowing for net injections – further boosting gas supply security, while reducing the demand for more traditionally expensive forms of generation.

Due to the intrinsic link between gas and power prices, this bearish trend was extended to equivalent GB baseload power contracts – with day-ahead power prices averaging £80.06/MWh, down 23.5% when compared to April. This loss is strongly attributed to the drop seen in its gas counterpart, although it is prudent to highlight that losses were limited by decreased wind generation production when compared to April levels.

Similarly, both front-month power contracts recorded losses, as June 23 fell 24.3% to £83.08/MWh, and July 23 curtailed 18.0% to £87.93/MWh. Likewise, seasonal power prices saw collective downwards price movements, falling 8.2% on average. Winter 23 continues to trade as the premium market, although prices dropped 10.7% month-on-month to average £141.2/MWh.

Brent crude prices saw a 9.5% decline month-on-month to average $75.74/bl following a surprise increase to US crude inventories, in tandem with mild Chinese demand. Losses were capped, due to uncertainty surrounding another potential supply cut ahead of the next OPEC+ policy meeting.