State of the Energy Market – 31st May 2022

Daily Updates

As today (31st May 2022) is the last day of the month, the prompt month moves from June to July. Gas and power for July 22 both opened with increases over yesterday’s closing prices. Weather forecasts for next week have been updated to suggest a few days of below seasonal normal temperatures, which is likely to mean that more gas will be used in power generation. In addition, wind forecasts for next week are also below the levels we would expect for this time of the year.

On the plus side, maintenance on the Norwegian gas fields is now complete and so we expect to see gas flows from Norway to the UK returning to normal today. As a result, prices for Winter 22 are currently down compared to yesterday for gas and level for power.

Gas

June 22 wholesale gas prices closed at 165.91 pence per therm on Monday, which was an increase of 8% against the previous day’s closing price.

Power

Wholesale power prices closed at £170.69 per MWh, which was an increase of 3% against the previous day’s close.

In other energy related news:

  • Exciting news, it seems that the UK government is giving serious thought to reopening the Rough gas storage facility that was closed in 2017. Back in 2017, it was viewed that the facility would not be needed as the UK started to prepare for a reduction of gas usage. However, the amount of renewable energy we have generated since then has not grown by the levels we need to stop using gas. The government are considering reopening Rough and to use it as soon as possible for gas injections in the run up to Winter. This will considerably help us to reduce our dependency on gas imports during the upcoming crucial Winter months, which should help to reduce the premiums we are seeing for Winter 22.
  • Holland’s Gas Terra and Denmark’s Orsted look likely to become the latest European suppliers to be disconnected by Russia for failure to pay for their gas in roubles. Both suppliers have openly stated that they have no intention to change their contracted payment terms. They added that they have made suitable alternative arrangements for their gas requirements with the expectation that Russia will be turning off their gas taps.
  • The EU has announced new sanctions against Russia, which include cutting pipeline oil imports by 90% by the end of 2022. It has taken many weeks to secure this latest punishment on Russia for their aggression against Ukraine due to Hungary vetoing all previous attempts. The agreement includes an exemption for Hungary, Slovakia and Czech Republic due to their limited alternative options to Russian pipeline oil.

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