UK Energy Market Summary to Friday 10th June 2022

Closing prices 10.06.2022

UK Gas and Electricity Markets

The British NBP spot price plummeted by 86% to 0.4p/kWh on Thursday driven by reduced demand for gas-fired generation. On the same day, on the forward curve, the gas price for Q3-22 delivery jumped by 10.5% to 6.1p/kWh after a fire knocked out a major US LNG exporting terminal in Texas.  Emergency crews were called to the Freeport LNG terminal (2nd largest in the US) after an explosion at the facility. There were no injuries but as a result the terminal will be shut down and remain shut for a minimum of 3 weeks. This has lifted near term contracts across Europe with the possible threat of disruption to LNG imports.

Renewable generation accounted for 34% of the UK generation mix last week with increased wind generation towards the end of the week which capped gains on short term gas and electricity prices and saw spot prices plummet. Curve prices are still heavily backwardated driven by the threat of supply disruption from Russian commodities as summarised below.

Other Energy Markets

On Wednesday, oil prices surged to a 13-week high as rising demand expectations in China and the United States, the world’s two largest energy consumers, fuelled fears about global supply constraints. As a result, Brent crude rose by 2.5% to $123.58 per barrel.¬† Oil prices did lose ground on Thursday and Friday after US consumer prices increased more than expected and parts of Shanghai imposed new COVID-19 lockdown measures. However, oil prices are still hovering at near three-month highs amid falling gasoline inventories in the US.

European carbon prices recovered after a four-day streak of losses on Thursday as traders covered short positions built up around the European Parliament’s vote on the ETS reform package. EUAs expiring in Dec-22 rose by 1.5% to 81.01 EUR/tonne. Carbon prices did fall overall last week as the European Parliament voted down a package of EU ETS reform proposals in an unexpected vote.

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