Energy Market Update - 14 August 2024

Crude Oil Declines Amid Eased Middle East Tensions; Nord Stream Concerns Resurface

Crude oil prices declined on Tuesday as market concerns over a broader conflict in the Middle East diminished, with Iran yet to act on threats against Israel. This led to a reduction in the risk premium that had been factored into oil prices. Additionally, OPEC+ revised its 2024 demand forecast downward, despite planning to increase output from October, further weighing on crude prices.

UK temperatures are projected to average 1-3 degrees above seasonal norms for the remainder of the week, potentially supporting cooling demand. However, forecasts of cooler weather combined with strong wind output have exerted downward pressure on week-ahead electricity prices. The gas market saw TTF Front Month contracts settle slightly lower at €39.48, influenced by steady flows through key Ukrainian transit points and stable EU gas storage, which is currently at 87.85% capacity.

Geopolitical factors continue to drive gas market movements, with Russian flows through Sudzha holding at 42.4 mcm/day. The market remains sensitive to the ongoing conflict near Ukrainian infrastructure. Additionally, recent developments around the Nord Stream pipeline have resurfaced concerns, as German authorities issued an arrest warrant for a Ukrainian individual allegedly involved in the 2022 attacks on the pipeline. Although Nord Stream remains offline, the renewed focus on this incident has added a layer of uncertainty to the European gas supply outlook.

In broader energy markets, Brent crude fell to $81 per barrel, driven by easing concerns over Middle Eastern supply disruptions and disappointing economic data from China, which signaled lower-than-expected demand. European carbon prices also saw a decline, with EUAs dropping to €71 per tonne amid reduced industrial activity and a subdued energy demand outlook.