Market Insight

Datasets reproduced in partnership with
logo of energy scan

Week 36, 2023

Seasonal divergence (GAS vs ELECTRICITY)

Whilst seasonal gas Forwards (upper section of chart) are now above those printed 6-months ago for all delivery periods down the curve (excluding Winter ’23), electricity prices (lower section) remain below those printed 6-months ago – reflecting an ongoing risk-premium for gas delivery as we draw closer to Winter ’23. Whilst electricity prices still offer comparative value for buyers for Summer’24/Winter ’24, the same cannot be said for gas prices – especially when you consider that monthly gas Day-Ahead averages for the last 12 months are at 128p/therm (including the highs of Q422). Markets remain uncertain if LNG supply tightness (7% global capacity) will be caused by strikes at two Australian (Chevron) LNG plants – negotiations are ongoing. China’s ambiguous economic data releases are also contributing to volatility – both exports and imports for August were down on the year by circa. 8%, but crude oil imports were up 30% for the same period! Fundamental drivers remain primarily bearish – with European storage at 92% versus the 5-year average of 82%; warm weather and solid supply supply-demand dynamics. Unweighted gas (Heren) monthly Day-Ahead averages are on target to achieve 82p/therm (or 2.8p/kwh). Outlook is neutral with contango state persisting at the front of the curve and not a lot of time left for prices to test the Summer ’23 lows set back in May.


Ordinarily, whilst still in summer heading toward winter (season-ahead), you’d expect to see 2-seasons ahead (Summer’ 24) at a considerable discount. However, given prevailing geo-political uncertainty and fears of winter supply tightness, season-ahead/2-seasons ahead are now at parity (see chart). Are we really to expect a Summer ’24 that will be as expensive as Winter ’23? It all depends on how temperatures play out across Europe over the coming months, and how storage holds up if/when a cold spell hits. We could also do without any unexpected damage to global gas transit infrastructure i.e., exploding pipelines and/or LNG terminals (such as we’ve seen over the last couple of years)! Unweighted (N2EX) monthly Day-Ahead averages are on target to achieve £87/mwh (or 8.7p/kwh). Outlook remains neutral with the Winter ’23 delivery having traded in a tight range between £140/mwh and £114/mwh since May ’23.



How can we help?

How can we help?