Energy Market Update - 04 December 2024
UK gas and power markets opened bearish today, with near-term gas prices falling below a key support level of 120p/therm amid mild weather forecasts and strong LNG arrivals.
The UK gas market is experiencing pressure due to expectations of 12 LNG cargoes arriving by the end of December, bolstering supply. Meanwhile, higher wind generation is anticipated, reducing gas-for-power demand. As of this morning, the UK system is slightly oversupplied by 4mcm/day, with LNG send-outs at 68mcm/day and total Norwegian exports to the continent reaching 333mcm/day. European gas storage remains high at 84.65%, ensuring stability despite colder weather boosting demand in Asia and leading to some LNG diversions.
Power markets saw a flat close in the previous session, with minimal day-on-day price movement. UK Front Month Baseload prices remained at £103/MWh, while spot power rose slightly to £126/MWh. Declines across the power curve were moderated by a stronger spark spread, although weaker UK carbon prices contributed to the overall downtrend. The National Grid cancelled a Capacity Market Notice issued earlier, reflecting improved supply conditions, though tight margins from nuclear and interconnector constraints linger.
In the broader energy landscape, Brent crude gained to $74/bbl amid expectations that OPEC will extend supply cuts into Q1 2025, lending support to the far curve. European carbon (EUA) prices dropped to €68.49, while Henry Hub gas settled at $3.04/MMBtu. Asian demand for LNG has pushed JKM prices up to $15.10/MMBtu, underscoring the competitive global gas market dynamics as winter progresses.