Energy Market Update - 23 August 2024

The energy market saw further slight declines yesterday as stable geopolitical conditions allowed some risk premiums to be eased. However, underlying nervousness persists, leaving the market sensitive to any potential disruptions.

Ofgem confirmed the October domestic price cap at £1,717 for a typical dual-fuel customer, aligning with previous forecasts. This reflects a return to pricing levels seen in April 2024.

The TTF Front Month contract settled at €36.59, a modest drop from €37.01, while the NBP Front Month decreased to 87.52p from 88.65p. The continued easing in these contracts is driven by stable gas supplies, with European storage levels reaching 90.54%—above the mandated target. Norwegian flows have slightly decreased as maintenance season approaches, with current flows at 316mcm/day, down from 321mcm. Despite this, the market has not seen significant upward pressure due to these reductions being anticipated.

UK power prices reflected the mixed sentiment in gas markets. The UK Front Month Baseload contract remained steady at £77, while the Front Season dipped slightly to £89 from £91. High wind generation today, spurred by the arrival of Storm Lillian, has contributed to lower spot prices. However, the return of approximately 1GW of CCGT capacity this weekend may stabilize prices. Looking ahead, warmer-than-expected temperatures next week could boost demand, potentially supporting prices.

In other markets, Brent oil edged up to $77 from $76 as global demand expectations rose, while EUAs held steady at €72. The Henry Hub fell slightly to $2.05 due to mild weather in the US, and JKM prices softened to $13.75 amid stable Asian supply, with the TTF equivalent at $11.92. These movements suggest a cautious market outlook, balancing current stability with potential future risks.