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Writer's pictureTom McGlynn

22/08/2022 - Weekly Wholesale Market Update

Updated: May 2, 2023

This morning, the Electric wholesale (Day Ahead) prices have opened up 26.23% higher than this time last week with Gas (Day Ahead) 32.85% higher.


As the bull run continued last week, 12m gas prices increased by another 20%, and wholesale power costs increased by 12.6% during the same time period. With gas prices expected to rise by 16 percent and power prices by 13 percent, short-term contracts were equally affected as long-term ones. Due to the increased pressure, many suppliers withdrew their pricebooks, refused to make any offers, or only made extremely limited and restricted offers.


The market's lack of liquidity was the primary cause of last week's price hikes. Sellers are holding onto volumes because they either think the market can and will track higher or because it is the holiday season and they are physically away from their desks. Sharp jumps have occurred throughout the week as a result of the lack of liquidity as frantic buyers grab anything they can get and sellers raise prices to keep up.


It's questionable whether these costs will decrease as more volume is available; the UK still has higher wholesale rates than much of continental Europe. Sellers can aim to close this deficit, especially as winter approaches and the UK has very few gas storage reserves. Due to its reliance on the spot market and flows from Norway, the UK will be particularly vulnerable to changes in the price of LNG and the possibility that Norway may have to defend its internal market due to dangerously low hydroreserves. We are still far from out of the woods because this winter's demand for LNG in Asia is anticipated to be high and Australia may curtail exports as well.


The overall energy complex is trending negative, with Brent down $1.24/bbl. and Carbon down €0.16/MT this morning. However, Dutch TTF tracks are up another 1.4 percent. Fears of a recession and declining demand in the US and China have a particular impact on crude, and the fact that Russian output has held up better than anticipated has created bearish conditions for the commodity.


More bullish news on the horizon as NS1 to be put into maintenance for three days at the end of this month.


How the market has opened each day:

DAY AHEAD PRICES

Gas (pence per therm)

Electric (£ per MWh)

15/08/2022

383.90

408.00

16/08/2022

390.00

408.00

17/08/2022

370.00

397.00

18/08/2022

384.50

372.50

19/08/2022

370.00

462.00

22/08/2022

510.00

515.00


7 day averages


Electric (£ per MWh) 427.08

Gas (pence per therm) 401.40


The below shows how the market compares to the previous week, month and year.





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