State of the Energy Market – 25th April 2022

Daily Updates

Monday’s (25th April) forward contracts have traded lower, down 5% on average from the previous day’s closing. The system continues to be well supplied with LNG, with 26 cargoes delivered so far this month and four more expected by the end of April. Strong exports to Europe have also returned, despite an unanticipated issue on the IUK hampering exports. Fears of demand reduction in China as a result of the lockdown expansion have resulted in continued declines in June-22 Brent contracts.

Gas

May 22 wholesale gas prices closed at 153.39 pence per therm on Monday (25th April), which was a 11% decrease on the previous working day.  

Electricity

Wholesale electricity prices for May 22 closed at £161.87 per MWh, which was a 4% decrease on Friday’s close.

In other energy related news:

  • Bulb is the UK’s seventh largest energy supplier, and it was the first company to be de-facto nationalized as the energy crisis worsened. Over the winter, the supplier was put on life support, with frequent infusions of public funds — the largest state bailout since RBS in 2008, according to Sky News – which might total £3 billion. It is one of 29 domestic energy suppliers that have gone bankrupt since September due to market turmoil.  When the first stage of the process closed earlier this month, the only two businesses that submitted non-binding proposals were British Gas owner Centrica and UAE-based energy giant Masdar. It’s uncertain whether any bid would be accepted, and a decision isn’t expected until June. While Masdar is expected to make a complete offer for Bulb, Centrica is solely interested in Bulb’s consumers and has requested public assistance to purchase the power needed to heat client homes.
  • Putin’s demands for payments in rubles have been rejected by the EU, however The European Commission said last week that enterprises in the EU may be able to pay for Russian gas in rubles without violating Moscow’s sanctions.  While Russia did not immediately cut off gas supplies to Europe after April 1, Vladimir Putin has threatened to cut off Europe’s gas supply if “hostile” states, including the entire EU, do not begin paying for gas in rubles. Flows from Russia continue, but the EU and its largest economy, Germany, are bracing for a possible gas supply disruption, either due to an energy embargo on Russia or a suspension in Russian shipments. According to economists and analysts, without Russian gas, Europe will suffer rationing, recession, and sky-high energy prices—even higher than recent record highs.
  • For the first time in more than six years, a super-tanker carried US crude oil to Spain, as Europe increasingly relies on American energy to replace supply shortages caused by Russia’s war in Ukraine.
  • Last year, the amount of Russian gas imported into the UK increased by 37%. Russia was the fourth most popular source of gas in the United Kingdom. According to the research, the UK paid roughly £1.12 billion for Russian gas imports.

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