Energy price update

Energy price update Q3: Prices stable through summer months

Several factors are applying pressure to lower prices, which are being offset by other factors pushing prices up. These should balance each other out for the next few months.

Gas prices have remained stable recently, even falling a little. This is due to an increase in gas delivered from Norway, coupled with falling demand due to higher temperatures.

Prices have also been pushed a little lower as coal and oil prices have fallen. This has been offset though by an increase in EU carbon allowances to an 11-year high. These costs are factored into the cost of power generation.

Gas price forecast

A continued increase in temperature as we move into summer, will reduce gas  demand further. LNG tankers continue to deliver gas which is also helping.

However, with tensions rising in the Middle East, oil prices may well increase pressure on gas prices to rise as well.

Looking ahead to the end of summer, when the temperature is expected to drop, should be offset by an increase in supply from Norway and other sources. This should keep prices relatively stable as we move out of summer.

The only caveat is maintenance at several UK gas fields, which will temporarily reduce gas supply. As a result, this may bring upward pressure to gas prices.

Electricity price forecast

Nuclear power will increase its contribution to the UK supply mix in coming weeks. EDF had taken several reactors offline for planned and necessary maintenance. Meanwhile, prolonged good weather over the summer will increase electricity productions from renewables.