Summer 23 period has ended, and the Winter 23 period has begun.
As we write the article, the market has increased over thepast week due renewed concerns over further possible disruptions being causedin Australia with the Chevron situation, the terrible violence taking place inIsrael and below average temperatures expected for the second half of Octoberin northeast Europe also adding further bullish pressure.
As we look out to summer 24 (April – September), the premiums did start to ease back and we saw prices fall below £100/mwh on the power and below 110p/therm on the gas, however, with bullish pressure spreading due to the above, it quickly pushed premiums back up again and they currently sit at £114/mwh on the power and 130p/therm on the gas, which I think is aheavy price for a summer period. We would like to see some more liquidity coming into summer 24 easing those prices back below £100/mwh again on the power and the same on the gas, below 100p/therm.
Europe is around 97% full in gas storage (at the time ofwriting), so that is looking positive, and the UK is expecting further injections over the coming weeks shoring up our stocks.
Leaks have been found in the Balti connector between Finlandand Estonia with similarities being mentioned between that and the Nord Streampipeline situation last year. Finland used to source gas from Russia, but along-term deal has just ended, and Finland are now receiving volumes of LNGfrom the US as well as gas supplies from other European countries.
There are concerns we may start to lose LNG shipments backto the Asian market who may likely pay a higher premium for shipments, but asit stands, LNG shipments to the UK have been strong.
We are in a considerably better position that this time last year, however, we are still more than double old ‘normal’ market levels, which again, we don’t believe we will see for a good few years to come unfortunately.
Given we are now in October, I believe it could already be sensible to start looking at the year ahead and gauging the market for next year’s renewals to see how things are looking, especially for any contracts due forrenewal before June 24. This helps give you an idea for budget purposes and some clients may want to lock-in options now to firm up those costs ahead ofthe deep winter to remove the risk of nasty market jolts if we do suffer a cold winter. The market is still happy to jump up, but still slower to fall back andas we can’t gauge the winter weather yet, it may be sensible to remove risk andlock-in for 24 renewals now.
Flexible contracts have become a lot more popular this year and we believe should be considered on the forward contracts. Clients have been concerned at the extra work involved but the reality is as the market is nowmore volatile, a flexible contract, although does carry risks, can now benefityou if we can take advantage of the market swings.
We are here to assist with flexible options and keep you posted on a daily basis with the trading periods to keep you up to date ensuring you can take advantage should the markets move to your advantage. Some clients are opting for flexible contracts and then locking in 50% upfront andleaving the balance open to try and benefit from swings.
Contact us for more information on flexible options.
