• Gas and electricity prices for the remainder of the financial year have risen strongly once again in the last month
  • Low European gas storage levels along with high Asian gas prices remain the main drivers for these increases
  • For Summer 22 and beyond both gas and electricity prices have registered smaller increases
  • LNG flows have fallen to minimal levels as a result of no new LNG shipments arriving into the UK so far this month.


Looking ahead, prices will be influenced by:

  • Asian/European gas prices
  • European gas storage levels
  • LNG shipments into the UK and Europe
  • Carbon prices
  • Day Ahead gas prices
  • Oil prices
  • Weather forecasts for the UK, Europe and Asia
  • Planned maintenance to Norwegian gas fields
  • Coal prices
  • General market sentiment amidst optimism regarding a potential relaxation of all Covid related restrictions
  • Concerns over the long-term economic impact of Covid-19
  • Currency exchange rates
  • Global and domestic economic indicators


Gas and electricity prices for the rest of the financial year have risen to unprecedented levels in the last month, driven by unseasonably high gas demand required to refill depleted storage sites, high Asian gas prices and supply concerns. In addition we have seen some extreme levels of trading volatility.

Day Ahead Gas

Day Ahead gas prices have traded above 90p per therm in July. It is rare that we see these price levels in the coldest of winters when demand could be expected to be very high - it is unprecedented to see these levels in summer. These high Day Ahead levels have resulted in similar increases in prices for the remaining months of the financial year. Prices for August have also traded above 90p per therm - the last time the front-month (ie the nearest month for delivery) traded above this level was in 2005. These unprecedented high prices are being seen throughout Europe - the equivalent front-month Dutch gas price recently traded above €36/MWh for the first time ever. We have also seen German front-month power prices trade above €75/MWh - the last time any German power contract settled above this level was in 2008.

Gas Storage Levels

One of the main drivers for these high prices has been the low levels of European gas storage. Gas is injected into storage sites during summer when demand is normally low and is available to meet periods of peak winter demand. Storage sites were severely depleted during the last winter when we saw spells of very cold weather. Storage levels for the current year were still around the five-year average at the start of April when we would expect demand to fall to allow injections to commence. This year, however, the colder weather continued throughout April and May which not only delayed injections but also required withdrawals to meet demand. As a result, storage levels are now at the bottom of the five year range which are, in turn, the lowest levels we have ever seen.

Asian Gas Prices

In addition to Europe, Asia also experienced spells of severely cold weather during the winter - at times the severity exceeded what was experienced in Europe. As a result, Asian gas prices rose dramatically in order to attract higher levels of LNG imports, particularly from the US. In January, Asian gas prices rose to £1.60 per therm, again unprecedented levels at the time. Whilst UK and TTF prices also rose sharply it was on a much smaller scale. In Europe increased demand was met through storage withdrawals, without the need to attract additional LNG cargoes. With storage sites now depleted as discussed above, LNG cargoes have become more crucial to meet additional demand. To attract these additional LNG cargoes Europe has to compete with Asia where there is also increased storage demand. Consequently, European gas prices have closely followed Asian gas prices higher since March since when gas prices have doubled, as can be seen in the graph.

Oil Prices

Having broken through the $70 per barrel resistance level, oil prices have continued to gain in value, threatening to break through the next resistance level of $80 before losing some value in recent days. Talks at the last OPEC+ meeting revealed tensions between Saudi Arabia and the UAE over continuing production cuts with the likelihood that a compromise will be reached allowing for production increases in the coming months, which could see oil prices stabilise or fall. Oil prices can be a driver for gas prices due to the proliferation of index lined contracts in Europe and Asia and have further contributed to the elevated gas and electricity prices that we are seeing.


The position remains largely unchanged from recent months, with the current short-term outlook for gas and power prices for the remainder of the year suggesting continued support, until gas storage levels recover to more substantial levels. Despite the very high Day Ahead gas prices in the UK, there has been a significant drop in LNG shipment arrivals, with non-so far in July. The majority of US cargoes are heading towards Asia where prices remain above UK and European gas prices.

In addition to the high prices, we are also seeing very high trading volatility. In the first week of July, we saw August gas prices fall by 10% in a day, followed by a further 5% fall the following day. This was followed by a 4% increase and then a further 10% increase, followed by a 6% fall. The general consensus is that market prices will remain high and volatile in the short term.


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