Energy Market Trends: March 2023

UK energy market prices have continued on a steady decline over the last month. As we approach the end of a mild, well-supplied winter, the front month gas and power contracts shed a further 10p/therm and £16.12/MWh respectively. The Sum-23 gas and power contracts currently trade at 110p/therm and £116/MWh, down 10p/therm and £12/MWh respectively. 

Prices spiked on 10th March due when further cracks were found within a French nuclear reactor. Whilst the regulator did order additional safety checks, EDF did not revise their capacity forecast for 2023 and the market quickly lost steam. Ongoing strikes in France are providing an upside as nuclear capacity is reduced and LNG terminals are not operating. 

The Freeport LNG facility could face delays to the return of a third of its capacity following a power fault on one liquefaction train. Whilst the plant currently runs at two-thirds of capacity, after being offline for eight months, the news has likely slowed further downside from reduced European demand and healthy gas storage levels. 

Elsewhere risk-off sentiment is dominating oil and carbon markets, following turmoil in the US banking sector in the third week of March. On carbon, long positions have decreased, and short positions increased, thus sending the signal that prices could fall in the future.

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