The biggest single cost on a bill is the price of the wholesale energy (Commodity). Before the energy crisis the wholesale cost of energy made up approximately 40% of an electricity bill and 70% of a gas bill, with the remainder being third party charges (non-commodity). Commodity costs have been continuously rising in recent years and can be extremely volatile. Currently, with the latest rise in wholesale costs mean that they now make up around 78% of a gas bill and 72% of an electricity bill. This pricing report will focus on the wholesale element of an energy price to help you keep track and understand the wholesale energy market and the factors affecting the price of your contracts. Overview: Currently gas and power prices are trading low, influenced by temperatures rising above seasonal norms leading to reduced energy demand, particularly for heating. Anticipated storms are forecasted to increase wind power, easing the need to burn gas for power generation, and further contributing to lower prices. Although Storm Isha caused power outages and disrupted LNG send outs, 10 LNG cargoes are scheduled to arrive at UK shores by mid-February, mitigating potential supply constraints. While the current market conditions present an opportunity for businesses to benefit from reduced prices, it is crucial to acknowledge market volatility. External factors such as escalating tensions in the Middle East, further storms expected and the ongoing situation in Ukraine can impact prices. Businesses should stay informed, evaluate contract rates promptly, and be proactive in adapting to evolving market dynamics. Bullish Factors (upwards pressure on markets) - Temperatures below seasonal norms
- Potential storm disruptions
Bearish Factors (downward pressure on markets). - Decrease in demand
- 10 LNG cargoes in the next 3 weeks
- Increased wind generation
- Above average seasonal temperatures
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