Energy Market Update - 13 August 2024

The energy market remains volatile as geopolitical tensions and extreme weather conditions drive price fluctuations, with the NBP Front Month contract experiencing notable swings.

Natural gas prices saw significant movement yesterday, with the NBP Front Month Sep-24 contract dropping by 2 p/th before rebounding to 96.40 p/th, still lower than the previous close. This volatility is largely driven by the ongoing conflict in the Kursk region of Russia, although gas flows through the Sudzha pipeline have remained stable. The UK also witnessed its hottest day of the year, with temperatures hitting 35°C in some areas, further influencing demand dynamics.

European gas markets experienced mixed results, with spot contracts rising amid concerns over potential disruptions to Russian gas flows. Although Russian gas deliveries via Sudzha were consistent, fears of infrastructure damage and the potential early cessation of the transit agreement due to the regional conflict contributed to market uncertainty. The UK power market also saw price support, particularly in spot contracts, as the day progressed.

This morning, the UK gas system opened with an 11 mcm/day surplus, supported by robust flows from Norway and the UK Continental Shelf, despite ongoing capacity reductions at Troll and Kollesnes. LNG sendout remains steady, with injections into storage facilities like MRS and Rough continuing in preparation for winter. As temperatures are expected to cool in the coming days, there may be an increase in Local Distribution Zone (LDZ) demand, further affecting market conditions.

In other markets, Brent oil prices have risen to $82.30 per barrel, while carbon prices (EUA Dec-24) stand at €72.65 per tonne. The NBP and TTF gas markets continue to reflect the broader geopolitical and supply dynamics, with NBP Front Month contracts trading at 97 p/th and TTF at €39/MWh this morning, both showing a slight decline from yesterday.