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28/02/2022 - Weekly Wholesale Market Update

It's hard to think it's just been a week since Europe's calm was disrupted and Russia's invasion of Ukraine escalated into a full-fledged military campaign. Any market attitude that existed at the start of the week has completely changed, and for the time being, future movements will be mostly influenced by the ongoing conflict.

Fears of protracted instability, the ripple effect of sanctions, the suspension of Nord Stream 2 certification, and the exploitable vulnerability of European reliance on Russian gas exports led to fervour overnight, with Month Ahead up 108.89p/th [51%] in a record single-day jump as fears of protracted instability, the ripple impact of sanctions, the suspension of Nord Stream 2 certification, and the exploitable vulnerability of European reliance on Russian gas exports led to fervour. On Friday, there was some reconciliation as sellers profited from the increase, and the satisfaction that Gazprom's EU flows appeared to be unaffected eroded support. Annualized gas contracts were up 26% this week, while electricity contracts were up 17.7%.

Brent Crude finally crossed the $100/bbl mark, as expected penalties on Russia, one of the world's top oil producers, tightened supply fundamentals. Brent, on the other hand, ended the week only 3% higher. In the broader energy mix, LNG and coal prevailed as alternative sources of fuel to piped Russian gas, and as a result, they benefited from the windfall, with LNG rising 8.4% and European coal rising 14%.

Those who anticipated the war would be finished by the weekend were surprised to see that vigorous resistance to Russian occupation in Ukraine has been able to force Russian tanks out of most of the country's major cities in the last five days of battle. As the sanctions mount – Russian planes have been prohibited from European airspace, and certain banks have been cut off from the SWIFT payment system – the prospect of escalation has grown. Putin has ordered Russia's nuclear force to be placed on 'high alert' ahead of talks with Ukraine.

After leaving their 20% interest in Rosneft, BP has virtually exited Russia, and more pressure on multinationals to divest themselves of Russian assets is expected. It's unclear how effective these sanctions will be in changing the trajectory of the war. Inflation is likely to climb in tandem with oil and wheat prices, exacerbating the cost-of-living crisis.

The energy market is absorbing the blow of this week's instability this morning, with S-22 UK Gas up 31.11p/th [13.9 percent] and front month up 34.39p/th [15.2 percent] as the currency falls to a historic low and Russia raises interest rates to 20%.

Most suppliers have pulled their pricing for the time being while they asses the true impact of the War on the UK market.

Today, the Electric wholesale prices have opened up 57.05% Higher than this time last week with Gas Increasing by 58.68%

How the market has opened each day:

Date Electric (£/MWh) Gas (p/therm)

21/02/2022 156.00 167.00

22/02/2022 158.10 186.85

23/02/2022 163.59 198.32

24/02/2022 235.18 314.74

25/02/2022 220.10 225.10

28/02/2022 245.00 265.00

7 day averages

Electric (£ per MWh) 196.33

Gas (pence per therm) 226.17

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

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