Energy Update – March 2022

Updated: May 16

Energy Buying Support for Hoteliers


Energy market rates remain painfully high. We strongly advise hotels to obtain professional support and guidance when managing this category over the coming year.



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Russia's invasion of Ukraine has led to Germany refusing to permit the Nord Stream 2 whilst tougher sanctions are in the process of being drawn up to place on Russia to isolate them from the global economy to a greater degree.

Sanctions on energy supply could prove to be detrimental to Europe themselves but may be required to help bring a halt to bloodshed being witnessed in Ukraine currently. Therefore, prices are continuing to climb in the utilities markets across Europe. In retaliation to the support that NATO members are giving to Ukraine, Putin has put his nuclear weapons on “special alert” which has spoked the markets even further as this could bring other countries directly into the fold and cause further conflicts.

For the best avoidance of risk, it would be recommended to secure a contract as soon as possible with extreme volatility still possible if things escalate further in Ukraine. To reduce the burden of the strength shown for contracts in the closer term, it is advised to contract further out to reduce pricing and spread the risk as longer term contracts continue to represent better value.




Utility Trading Graphs


Electricity


Gas



Market Conditions / Price Drivers:


Russia-Ukraine Tensions - Contract prices seemed to be softening gradually for the most part of February before the Russian invasion of Ukraine which enticed strong volatility in contracts once again, as gas supply into Europe was threatened. The biggest threat came from sanctions. Russian supply makes up to 40% of Europe's use of gas and sanctions could hamper the ability to receive gas as well as increase the cost of it. Alternative sources are likely to be required which could put further pressure on the global gas system which has been feeling the pinch since 2021. European gas storage is already towards the floor of its 5-year historical average range and will require more injections before the next winter.


LNG Supply - Expected to remain strong in February after a record number of arrivals in January. Traders are wary of some cooler forecasts in Asia that may increase demand. Spreads for the time-being remain in favour or European prices rather than Asian prices but are much narrower than in December/January.


Revised temperatures - forecasts are showing that temperatures will average to slightly below average for the next couple of weeks, although they were forecast to be higher. Wind generation is also expected to fall.


Russian gas flows - Since 21 December the direction of flows between Europe and Russia has been eastward; with Russia requiring gas due to colder temperatures. Europe has instead been withdrawing from storage and using LNG as opposed to receiving pipeline flows since December, pushing storage levels below the 5 year average.




This information is provided by our HCC Market partners, Assured Energy, who are part of The Consultus International Group. Any information provided is given on an advisory basis and both HCC and Assured/Consultus are in no way liable for any action taken by the reader with regards to their energy purchasing.


If you need help with your energy tender, then take advantage of our Energy Tender Management Service. Full management of your tender and switchover for just £99 (incl. VAT).

https://www.hotelcostclinic.com/service-page/energy-tender-management-service


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While you are here, please take time to have a look around HotelCostClinic.com and see where the team might help you over the coming months.


Why not try a free introductory session (Free Treatment) on any area of support. Sign up and drop a note to support@hotelcostclinic.com and we will be happy to help.