Pipes running through the desert.

Energy market prices may still rise

Advantage Utilities has reported that energy market prices could still grow, despite decline of wholesale prices

The UK’s gas supply may be further disrupted by annual summertime maintenance, which constricts its ability to increase gas flows. When unplanned outages are also factored in, output is further limited. Both of which are significant upwards drivers of energy market prices, especially during the summer months.   

Though wholesale prices have dropped from the highs of last year, prices remain higher than pre-2021 levels. However, since June, the market has rebounded in response to the low levels of available liquefied natural gas (LNG). This has been combined with the poor wind yield and unplanned outages at gas fields. All of which have increased the UK’s reliance on gas, once again.

International factors may also significantly increase LNG prices. As any increase in demand for gas in China threatens to start a trade war in Europe over LNG supply. Global LNG supply is expected to increase by 3.7 percent this summer, almost half of last year’s 6.4 percent growth. With China importing near to the top-end of the five-year rolling average in LNG imports, a question remains as to whether supply will remain as available for both Europe and China’s needs.

European gas storage levels are approximately 73 percent full this year, the second-highest level since 2018. As a result, LNG prices have dropped, but increased gas demand could undo this.

Commenting on the recent report, Advantage Utilities CEO, Andrew Grover, said: “Despite the fall in wholesale energy prices in recent times, a question remains as to whether this trend will continue or if prices will rise once again. From what we have seen in June, prices have in fact increased slightly and unplanned outages this summer could push prices up further.”