On Monday, European benchmark natural gas prices decreased by 4%, reaching their lowest level since September 2021. The price decline was attributed to a combination of factors, including milder weather, the resolution of a supply outage in Norway, and the expectation of stronger winds in northwest Europe.
- On Monday morning (13th February 2023), the benchmark gas prices in Europe reached their lowest point since September 2021.
- Europe is increasingly confident that there will be no gas shortages for the remainder of the winter season.
- Yesterday (14th February 2023), the wholesale gas prices in the UK decreased as a result of the anticipated increase in wind power generation on Tuesday.
UK and European markets are more optimistic that there will be no gas shortages until the end of this winter, and the Freeport LNG export facility in the United States resumed shipments from storage after a fire halted exports in June 2022.
In addition, the UK’s wholesale gas prices also decreased, given the expectation of stronger wind power generation on Tuesday 14th February 2023.
Furthermore, Norway’s gas supply to Europe made a sharp recovery on Monday from Sunday following the resolution of an unplanned outage at the large Troll gas field, easing concerns about immediate supply.
What are the main market factors?
- Weather: Weather patterns can significantly impact energy demand, particularly for heating and cooling. Cold temperatures in the winter can lead to increased demand for natural gas, which can lead to higher energy prices. Conversely, mild temperatures can lead to lower demand and lower energy prices.
- Supply and demand: Changes in energy supply and demand can impact energy prices. Increases in supply, such as increased production of renewable energy or new sources of natural gas, can lead to lower energy prices. Conversely, a decrease in supply, such as a pipeline outage or unplanned power plant outage, can lead to higher energy prices.
- Government policies: Changes in government policies and regulations can also impact energy prices. For example, changes in carbon taxes, subsidies for renewable energy, or changes to import/export tariffs can impact energy prices.
- Geopolitical events: Political tensions, conflicts, or changes in the global oil market can also impact energy prices. For example, tensions in the Middle East can lead to higher global oil prices, which can impact energy prices in the UK.
- Economic conditions: Economic conditions, both domestic and global, can also impact energy prices. A growing economy can lead to higher energy demand, which can lead to higher prices. Conversely, a slowing economy can lead to lower demand and lower prices.
- Liquefied Natural Gas (LNG): The role of LNG is increasingly playing a significant factor and impact on costs for UK Energy Prices. As the EU and UK are less reliant on Russian Gas Exports, alternative sources are required to meet gas demand meets.
In summary, many factors can impact UK energy prices right now, including weather, supply and demand, government policies, geopolitical events, economic conditions – not to mention Russia’s continued invasion of Ukraine. It is essential to monitor these factors and their potential impact on the energy market to stay informed about potential changes in energy prices.
Short Term Forecasts
Energy prices are inherently volatile and carry much of the risk over the short term, and it can be challenging to predict the direction of the market in the short term. However, many industry experts and analysts use a combination of technical and fundamental analysis to forecast short-term energy prices. Our technical analysis looks at historical price and volume data, with fundamental analysis on supply and demand factors that can impact energy prices. These techniques, combined with a good understanding of the energy market, can provide insights into short-term price movements.
If your business energy supply contract is up for renewal in the next 6 months, we strongly recommend you speak with us today.
Long Term Forecasts
Long-term energy price forecasts can be influenced by various factors, such as geopolitical events, global economic conditions, technological advancements, government policies, and climate change.
Many experts forecast that energy prices in the UK and across the globe will continue to rise in the long term, primarily due to the increasing demand for energy and the ongoing transition to cleaner and more sustainable sources of energy. This transition is expected to result in significant investments in renewable energy technologies such as wind, solar, and hydropower, which can require large capital expenditures.
In addition, the UK government has set ambitious targets to reduce carbon emissions to net-zero by 2050, which will require significant investments in low-carbon infrastructure, such as electric vehicles and renewable energy generation. These investments are expected to impact energy prices in the long term.
Rising Third Party Non-Commodity Costs are also playing a significant impact on rising electricity costs. With electricity costs made up of over 60% of Third Party Non-Commodoity Costs, there is less opportunity to take generate savings through movements in wholesale costs. At UtilityWorks, we track the market every hour of every day, so you don’t have to.
If your energy supply contracts are up for renewal 6+ months and beyond, we strongly recommend you make use of our Utility Health Check, so we can monitor the market on your behalf and ensure you benefit from movements in the energy market.
Wholesale Energy Market Costs (15th February 2023)
How is the Russian Invasion of Ukraine impacting energy costs lately?
The Russian invasion of Ukraine has the potential to impact UK energy prices due to the interconnectedness of the global energy market. However, the full extent of the impact is difficult to predict as it depends on the duration and intensity of the conflict, as well as any potential responses by other countries and organizations.
As of now, the immediate impact on UK energy prices appears to be relatively limited, and prices have not seen a significant increase. However, the situation is evolving, and any disruptions to gas supplies from Russia to Europe could lead to higher prices in the UK.
The UK is not heavily reliant on Russian gas, but many European countries, including Germany, Italy, and France, depend on Russian gas imports. Any disruption to the gas supply from Russia to Europe could lead to a tightening of gas supplies, higher demand for liquefied natural gas (LNG), and an increase in gas prices across the global market, including the UK.
Furthermore, the conflict in Ukraine can also impact energy prices indirectly, by affecting global oil prices. Any prolonged conflict or disruption to oil production in the Middle East, for example, can lead to higher global oil prices, which can, in turn, impact energy prices in the UK.
In summary, while the immediate impact of the Russian invasion of Ukraine on UK energy prices is relatively limited, the situation is evolving, and any prolonged conflict or disruption to gas supplies could lead to higher energy prices in the UK.
The role of Liquefied Natural Gas (LNG)
Liquefied Natural Gas (LNG) is playing an increasingly important role in the global energy market and is impacting energy costs in several ways.
Firstly, the growth of the LNG market has increased the supply of natural gas, which can help to lower energy costs. Advances in technology and increased investment in LNG infrastructure have made it easier and cheaper to transport natural gas from areas with abundant supplies, such as the United States and Australia, to areas with high demand, such as Asia and Europe. This has led to a more interconnected and competitive global natural gas market, which can help to keep energy costs in check.
Secondly, the increased availability of LNG has also led to a rise in the use of natural gas as a cleaner alternative to coal and oil in power generation. Natural gas produces less carbon dioxide than coal and oil, and this has led to increased demand for LNG as countries seek to reduce their carbon footprint. The increased demand for LNG as a power generation fuel has also helped to support prices and boost investment in the LNG industry.
However, it’s worth noting that in the short term, LNG prices can be volatile, particularly in response to changes in supply and demand. For example, during the COVID-19 pandemic, a drop in demand for LNG led to a significant fall in prices. Similarly, during periods of high demand, such as cold winters or heatwaves, LNG prices can rise as countries compete for supplies.
In summary, LNG is impacting energy costs by increasing the supply of natural gas, helping to reduce carbon emissions from power generation, and supporting investment in the LNG industry. However, the short-term volatility of LNG prices means that energy costs can fluctuate in response to changes in supply and demand.
LNG and The UK
LNG has been playing an increasingly important role in the UK’s energy mix in recent years. As the UK has shifted away from coal-fired power generation and towards cleaner sources of energy, such as natural gas, the use of LNG has become an important part of the country’s energy strategy.
The UK’s domestic production of natural gas has been declining in recent years, which has increased the country’s reliance on imported gas. LNG is one of the key sources of imported gas for the UK, alongside pipeline imports from Norway and the Netherlands.
The UK has invested in LNG infrastructure to support the growth of the market. The country has several LNG import terminals, including the South Hook and Dragon LNG terminals in Wales and the Isle of Grain terminal in Kent. The UK also has a growing fleet of LNG tankers that can transport LNG from overseas suppliers to the UK.
LNG has helped to increase the security and diversity of the UK’s energy supply, as well as to support the country’s transition towards a lower-carbon energy system. However, the UK’s access to LNG can be impacted by global market dynamics, including changes in supply and demand, which can affect the price and availability of LNG.
Overall, LNG is an important part of the UK’s energy mix and is likely to play an increasingly important role in the country’s energy future as the UK continues to transition towards cleaner sources of energy.
Summary
In summary, several factors can impact UK energy prices currently, including weather, supply and demand, government policies, geopolitical events, and economic conditions. It is essential to monitor these factors and their potential impact on the energy market to stay informed about potential increases or savings on your energy contract.
Our Utility Health Check will give your business a full market independent analysis and review. We also track the market and monitor events as they happen in real time meaning we give your business the best opportunity of mitigating financial risk and market exposure when it comes to energy costs.
