Gas and power prices are at their highest level since the first half of 2023. Here is what moved the market and what it means for your business.
Summary:
- Gas and power rose for four sessions in a row after a softer Monday.
- 12 month prices for both closed the week at their highest since the first half of 2023.
- Tension in the Strait of Hormuz, Norwegian gas field outages and colder forecasts drove the rise.
- European gas storage is around 73% full, the lowest for this time of year since records began in 2011.
Market commentary
Prices rose firmly this week. Monday eased as traffic through the Strait of Hormuz picked up, but gas and power then climbed for four sessions in a row. By Friday, 12 month prices for both had closed at their highest level since the first half of 2023.
The mood shifted on Tuesday when reports confirmed a liquefied natural gas (LNG) carrier had been hit by a projectile in the Strait. This followed what was reportedly the heaviest week of tanker attacks since the war began, and transits fell to their lowest in more than two months.
Extended outages at Norway’s Dvalin and Heidrun fields added pressure midweek. On Friday, reports of a laden supertanker struck off the UAE, together with forecasts of colder weather, kept the rally going into the weekend. Strong winds pulled day ahead power prices sharply lower late in the week, but forward contracts kept rising alongside gas.
Storage remains the main concern. European sites are only around 73% full, the lowest for this time of year since records began in 2011. The injection season, when gas goes into storage ahead of winter, is almost over.
Signals from Washington were mixed. Reports suggest the Pentagon has told commanders to prepare for a possible resumption of strikes, while the President said none would come before the midterms. Until traffic through the Strait recovers properly, each new incident there is likely to push forward prices higher.
What this means for your business
Nobody can tell you where prices go next. What you can control is how exposed you are and when you act.
If you are on a fixed contract
Your unit rates are locked for now, so this week’s rise does not change your bill today. It matters when you renew.
- Check your contract end date and any notice period.
- If you renew within the next 6 to 12 months, start reviewing options now rather than in the final weeks.
- Bear in mind that fixing early is not always cheaper. Prices can fall as well as rise, and the right timing depends on your budget and how much risk you can carry.
If you are on a flexible or variable contract
Wholesale moves reach your costs faster, so a week like this one feeds through more directly.
- Find out exactly how your price is set and how often it changes.
- Check whether your contract has trigger points that let you fix part of your volume.
- Ask whether fixing some of your usage for winter would give your budget more certainty. This depends on your appetite for risk.
Questions worth asking before winter
- When does my contract end, and when can I start looking at renewal prices?
- How much of my cost is exposed to wholesale moves right now?
- What happens to my budget if prices stay at this level through winter?
- Is my current contract still right for how my business uses energy?
For care homes, hotels, restaurants and sports clubs, colder weather usually means higher heating and lighting demand. If that applies to you, the questions above carry more weight this year.
Get the full UK Energy Market Update
Download the full wholesale market update as a PDF for your records Rybeda 12th October Weekly Energy Market Update or to share with your operations & finance team.
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