First Market Update of 2023
It’s been a positive start to 2023, over the last week we have seen several factors that are helping drive the UK’s energy markets downwards:
· Maintenance at the Karsto gas field in Norway has been completed, increasing flows to the UK, and offering downward pressure to UK gas contracts in the short term.
· UK gas storage reserves have not been needed as much as previous years for the winter period following the sustained spell of mild weather, adding further downward pressure to future UK gas contracts.
· French nuclear generation now sitting around 42 GW, up from last week's fuel saving efforts, offering downward pressure to UK electricity contracts.
· Rising wind generation into the weekend is reducing demand for gas fired generation and offering more good news to UK energy contracts.
Business groups are expecting government support for energy contracts to be halved after Mar-23, when the current scheme ends and extended for 12 months until Mar-24. Jeremy Hunt is set to meet with these groups to brief them of the government’s plans for supporting non-domestic energy users with their energy bills after the current package expires. The details of the support are expected to be announced next week. The cost of the current 6-month scheme is expected to be around £20 billion, with this proposed extension likely costing a similar amount, although the lower wholesale energy prices could lower the total bill. Additional support would provide relief and certainty to businesses that they could afford to continue operations in this unprecedented time.
Temperatures above seasonal norms coupled with above average wind generation throughout late December have sparked some much-needed relief to UK energy markets. Prices have dropped substantially compared to levels seen in the weeks leading up to Christmas, which was a period of particularly cold weather and low wind generation. These levels picked up over the Christmas period, greatly reducing household heating demand and gas-fired generation demand. This has then since eased concerns of supply shortages and potential blackouts as we head in to 2023 and is posing much more positive sentiment to UK energy markets, with these levels forecast to continue in to mid to late Jan-23. Though this is something to be mindful of, given the uncertainty in weather forecasts.
If your contract is due for renewal in April and you would like some impartial advice on your options contact the team:
Email: info@dukefieldenergy.co.uk
Phone: 0345 4022 461