Annual markets continue to fall, with the front annual power hitting a 2.5 year low for the equivalent period (October ’21 in June 2021). This is in spite of what would usually be taken as bullish drivers – geopolitical tension in the Middle East and much colder weather than November or December. There has been increased gas consumption for domestic heating and for gas-fired generation as wind speeds drop and gas makes up the renewable shortfall. However, the UK has received more LNG shipments than usual, and EU gas storage remains well above seasonal averages in spite of increased withdrawals. Milder forecasts after the current cold snap could well put more bearish pressure on prices. Things could of course change if the latest interactions with Iran and Iranian proxies deteriorate into more aggression (as Iran could potentially cause more disruption in the Arabian Gulf and thus limit oil and LNG exports), but overall, generation is well supplied and cost sentiment remains downward.

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