Energy Market Update - 04 October 2024
UK natural gas prices continued their upward trend yesterday, driven by escalating geopolitical tensions and supply constraints. Power prices also rose, supported by strong gas market movements and bullish carbon markets.
Geopolitical concerns deepened after US President Joe Biden hinted at possible support for Israel in targeting Iranian oil facilities. His comment that discussions were ongoing led to a market rally, with oil prices climbing 5%. This, in turn, fed through to gas markets, pushing the UK NBP Front Month to 100.28p/therm, up from 95.86p/therm, while the TTF Front Month increased to €39.91/MWh. Norway’s Troll field remains on unplanned outage, reducing output by 15.8mcm/day, though Norwegian flows are expected to improve in the coming weeks.
UK power prices followed gas movements, with the Front Month contract rising by £2.98/MWh to settle at £84.96/MWh. Forecasts for wind power production next week have been revised upwards to 11.2GW, which is expected to ease demand for gas-fired generation. Far curve contracts also saw gains, with the UKA December ’24 carbon contract settling at £36.65/tCO2, reflecting broader market strength driven by geopolitical uncertainty.
Globally, the International Energy Agency has warned of tight gas supply in 2025 due to record-high demand, adding further tension to an already volatile market. In Europe, energy security remains a priority, with EU gas storage at 94.33% and three LNG vessels expected to arrive in the UK over the next two weeks. However, the rising conflict in the Middle East has caused concerns over oil supplies, which are crucial for the LNG market, as Europe continues to rely heavily on LNG imports in the absence of Russian gas. Brent crude prices surged to $78 per barrel, highlighting the potential for further energy price increases amid ongoing global tensions.