Compared to other seasons, summer is traditionally a less volatile and less expensive period for energy commodities. But this summer has seen unseasonal gains.
For example, Day Ahead gas prices increased to above 90p/therm during July – something never before seen during a summer month.
Power prices followed the upward trend, with the N2EX Day Ahead Index out turning as high as £107.54/MWh on 26 July.
We've also seen high levels of volatility in single days, with the market reacting strongly to events such as:
But overall, unplanned outages in some Norwegian gas fields and ongoing low storage levels pushed gas prices up, with sizeable gains in the Winter 21 contract which rallied from 95.45p/th to 103.29p/th over the month of July.
This had a knock-on effect on power prices, along with low wind generation and a rise in temperatures, which creates increased demand for cooling.
The move higher was further exasperated by a lack of liquidity, which saw Winter 21 baseload close July as high as £103/MWh.
Oil prices were also on the rise, with higher demand and low storage levels increasing demand.
But concerns about a delay to the economic recovery by the fast-spreading Delta variant of the Coronavirus created some downward pressure. So the overall monthly rise for oil prices during July was just 1%.
As hopes of a global recovery continue, we expect further changes to economic indicators that are likely to impact prices. For example, more competition for energy commodities as manufacturing production increases around the world.
A heatwave in mainland Europe during August could also increase demand for power, especially in countries that rely on air-conditioning.
For UK businesses, this all adds to increased uncertainly when it comes to buying energy and managing flexible-purchasing contracts.
For help and guidance – or to revise your energy-buying strategy – do contact your Client Lead or Client Portfolio Manager (existing customers). Or drop us an email to info@npowerbusinesssolutions.com.
Our team of market experts are always happy to share risk management insight and market knowledge
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