• Gas and electricity prices for the remaining winter months have surged to new highs in the last six weeks, with significant moves this week in particular

  • Prices for 22/23 have also increased significantly over the same period

  • Ongoing supply concerns remain the main market driver along with increased     buying interest as market participants look to reduce risk prior to the Christmas   holidays

  • Carbon prices have also increased over the last month, providing additional support to electricity prices


 *Note monthly change since 12th November


Looking ahead, prices will be influenced by:

  • Russian gas flows
  • LNG shipments into the UK and Europe
  • Weather forecasts for the UK, Europe and Asia
  • Asian/European gas prices
  • European gas storage levels
  • Carbon prices
  • Day Ahead gas prices
  • Geopolitical concerns, particularly Russia/Ukraine tensions
  • Oil prices
  • Further updates on Nord Stream 2
  • Coal prices
  • Renewed concerns regarding increasing Covid infection rates
  • Concerns over the long term economic impact of Covid-19
  • Currency exchange rates
  • Global and domestic economic indicators


Gas and electricity prices have risen dramatically over the last six weeks as a combination of concerns regarding Russian gas flows, a reduction in European gas storage levels due to colder weather, news of the unavailability of a number of French nuclear units and the risk of colder weather after Christmas increase buying interest as market participants look to reduce their risk exposure.

Day Ahead Gas

January gas prices have increased by 119% in the last six weeks, and Day Ahead gas prices by 136% over the same  period. One of the main drivers for these increases has been concerns regarding Russian gas flows as mentioned above. We have seen only marginal increases in flows over a period where the markets were hoping for something more significant. Along with news of further delays to Nord Stream 2, and the build-up in  Russian troops on the border with Ukraine, this has added significant supply risk for the remaining winter months.

Gas Storage Levels

The low level of European gas storage remains one of the main drivers to the increases in gas and electricity prices. Storage levels are currently well below the five year average, and currently approximately 23% below last year’s levels.   Given that by the end of last winter storage levels had fallen to all-time lows, a 23% deficit raises the significant risk that gas storage will be severely depleted by the end of the current winter. Some estimates suggest that storage levels could fall as low as 8% full by the end of the 2021 gas winter. This would compare to 10% on 31 March 2018,  after the Beast from the East caused spiking demand. The above estimate is based on average temperatures - more severe weather would obviously have a greater impact which partly helps to explain the increases in gas and electricity prices.

LNG Deliveries

With the continuing uncertainty with regard to Russian gas flows and the low levels of gas storage, LNG deliveries into European are becoming ever-more important. Europe continues to compete with Asia for LNG supplies, particularly from America where supply is more price-sensitive. Asia is anticipating a cold winter due to a ‘La Nina’ weather event, and LNG demand therefore remains high. In order to attract the additional LNG Asian gas prices have surged along with European prices in recent weeks. Currently UK and European gas prices are at approximate parity with Asia which, allowing for the higher transportation costs for shipping US cargoes into Asia, should see more cargoes heading towards Europe in the short term.

French Nuclear Power

In addition to the above gas supply concerns, news that four French nuclear reactors would be off-line during Q1 saw a spike in electricity prices last Thursday. Nuclear fleet operator EDF decided to extend the shutdown of the Civaux 1 and Civaux 2 reactors, totalling 3GW in capacity until 30 April and 31 March 22 respectively. This was due to issues detected in the safety injection system circuits of both reactors.

In addition, the two Chooz reactors, also totalling 3GW in capacity and based on the same technology as the Civaux plants, will be shut down as a precautionary measure to carry out additional inspections. Both reactors will remain off-line until 23rd January.

Electricity generation margins in France and the UK were already predicted to be low in Q1 and the loss of this nuclear generation exacerbates the risk of shortages.

The UK would expect to import up to 3GW of electricity from France - with the loss of these nuclear units this situation might be reversed with the UK exporting to France. This potentially increases the strain on UK generation margins and resulted in a 33% increase in UK electricity prices for January as prices rose to maintain parity with France.

Oil Prices

Oil prices have proved the exception in the significant increases that we have seen in commodity prices. Rising concerns with regard to the rapid spread of the Omicron variant around the world and the potential impact on oil demand have resulted in oil prices falling from recent highs. A number of European and Asian gas prices are index-linked to oil prices, and therefore movements in oil price can impact on gas prices.


The gas and electricity markets are likely to remain volatile in the coming weeks whilst significant supply concerns remain. LNG supplies and changes in Russian pipeline supply are expected to be key drivers for prices for the rest of the year, and into Q1 next year, along with weather forecasts. Geopolitical factors also remain key, particularly the build up in Russian troops on the border with Ukraine, and the threat that any conflict poses to Russian gas supplies. Carbon prices and French nuclear availability are likely to prove additional drivers to electricity prices.


23rd December 2021



Looking for ways to improve your energy efficiency?

Get in touch with our team today

Speak to our team

0333 101 4424