Energy Market Update - 03 October 2024
The UK gas market has opened slightly higher this morning due to colder weather forecasts and declining wind generation, with the November 2024 contract rising by 0.40p/th to 96.40p/th.
Gas prices have been supported by the forecasted drop in temperatures, expected to fall around 3 degrees below seasonal norms by mid-October, increasing demand. Wind generation remains below seasonal expectations, lifting gas for power demand to 39mcm today. Additionally, ongoing unplanned outages at Norway’s Asgard and Troll fields are reducing supply by 23mcm. However, despite these disruptions, the UK system has opened long, with higher gas flows through the Langeled pipeline and UKCS receipts nominated at 100mcm/day. LNG send-out is stable at 31mcm/day, with two cargoes expected to arrive in the UK shortly, ensuring steady supply.
UK power prices followed a similar trend, with lower prices on Wednesday aligning with gas market movements. However, spot contracts have shown resilience, supported by rising wind generation, which reached around 10 GW in recent days. The planned return of the IFA1 interconnector between the UK and France on 24 October is expected to bolster supply further. On the wider energy front, Brent crude prices softened slightly to $74.75/bbl, though the ongoing Middle East conflict continues to underpin overall commodity price levels. Carbon prices remain firm, with the EUA Dec 2024 contract at €62.60/tonne.
Looking ahead, UK gas prices are expected to remain stable, with the system’s surplus supported by increased Norwegian exports, despite the outages. EU gas storage is nearing full capacity at 94.34%, limiting upward pressure on prices. However, continued geopolitical tensions and weather-driven demand may keep the market sensitive to supply changes. The TTF Front Month contract has dipped to €38, reflecting a modest €1 decline, while UK power contracts show minimal movement, with the Front Month Baseload contract at £82/MWh.