The general downturn in energy prices since the last real spike at the end of September has continued. This has been driven a lot by the unseasonably mild weather that has persisted through much of October. This has meant heating demand for gas is well below expectation, although generation demand has picked up in the UK to satisfy export requirements from France. With a new government, so we have a revised energy policy in the UK – Rishi Sunak has quickly reinstated the moratorium on fracking and seems less keen on on-shore wind generation. Whilst gas and power prices are generally lower for the first part of the winter (potentially reducing the government’s price cap cost burden), there still remains a lot of risk associated with the first quarter of 2023. A prolonged cold snap could expose the UK in particular due to the very limited gas storage (in spite of the mothballed Rough facility reopening). The Russian position on gas flows is still a factor – flows persist, but at a reduced level. If Russia cuts these, so European nerves could increase, pulling prices higher.

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