Energy Market Update - 01 November 2024
The energy market opened with notable declines this morning, driven by softening demand forecasts and cautious sentiment around geopolitical developments.
In the UK, the National Balancing Point (NBP) day-ahead contract saw a reduction of nearly 1.4%, reaching 99.43 p/therm, as mild temperatures reduced the need for heating while low wind generation partially offset gas demand reductions. The UK gas system opened near balance, although gas-for-power demand rose to compensate for lower-than-average wind speeds. The front-month gas contract for December 2024 traded around 101.25 p/therm, with fluctuations exceeding 102 p/therm earlier. TTF gas contracts showed an unusual structure, with Summer 2025 priced above Winter 2025, reflecting potential market concerns about sustained supply-demand pressures in future summer periods.
Geopolitical factors are influencing market sentiment, notably with the upcoming U.S. elections on 5 November. Market participants are attentive to potential policy shifts regarding LNG exports and environmental regulations, both of which could affect global supply chains. Rumours of a prospective Azeri gas swap agreement, intended to support Ukraine’s gas access after the existing transit deal with Russia expires, triggered a sharp sell-off late yesterday. While unconfirmed, the rumour was enough to decrease European benchmark prices by as much as 6%, with NBP and TTF contracts shedding value in early trading today.
European power and gas prices experienced downward pressure, attributed to consistent Norwegian flows, which were recorded at 337.8 mcm/day, and mild weather forecasts across the region. UK power prices aligned with this trend, as the front-month baseload contract declined to £85/MWh from £91/MWh, while the day-ahead UK base contract was priced at £90.10/MWh. The stability in UK Continental Shelf (UKCS) supply and consistent Norwegian exports, combined with LNG cargoes expected in the UK by 6 November, contribute to a balanced outlook for the upcoming week.
Looking forward, gas market activity may remain cautious, with ongoing discussions over the Ukraine transit deal likely to influence sentiment in the weeks ahead. With two LNG shipments en route to the UK, stable European gas storage at 95.2%, and French nuclear output projected to meet high demand, supply security appears stable heading into winter. Nonetheless, low wind generation and continued maintenance in Norwegian facilities may pose risks to gas availability for power generation in the near term.