Energy Market Update - 05 November 2024
UK gas prices have opened higher today as supply tightens, driven by a short system and sustained demand for power generation amid low wind output and mild temperatures.
Natural gas prices across the UK and Europe saw strong gains in the previous session. The NBP Day-Ahead (DA) contract climbed nearly 6 pence to settle at 101.35 p/th, while the Front Month contract rose by just over 4 pence to 102.46 p/th. UK gas demand increased slightly to 221 mcm, with power generation requiring 64.5 mcm of gas as low wind generation persisted. The UK turned to storage withdrawals, with flows reaching 33.4 mcm, while domestic production remains below capacity. Additionally, UK power prices continued to follow the trend in gas, with the Day-Ahead Base settling at £112.44/MWh, supported by lower wind generation and colder weather ahead.
Geopolitical factors are adding to market volatility. Yesterday’s gas price increases reversed earlier losses, as rumours of an Azeri gas swap deal were dismissed by SPP, the Slovak gas importer. Concerns about potential disruptions to Russian gas flows into Europe remain, with no new capacity bookings for next year and uncertainty surrounding a transit deal. In the spot market, the TTF Front Month contract rose to €41/MWh. The upcoming US elections and ongoing tensions in the Middle East, especially involving Iran and Israel, could further influence commodity prices and market sentiment. Meanwhile, Brent oil settled at $75.08/bbl, and EUA carbon prices rose to €65.22/tonne.
Norwegian flows into the UK are also a focal point. Maintenance that has restricted Norwegian deliveries via the Vesterled pipeline to St. Fergus will now extend until 26 November, four days longer than previously planned. In addition, the Culzean field, one of the UK’s largest gas producers with a capacity of 10 mcm/day, will be nearly fully offline for maintenance from 3 to 6 November. Norwegian exit nominations currently stand at 324.7 mcm/day, though an unplanned Vesterled outage is curtailing an additional 5 mcm/day. The UK system opened 12 mcm short today, with interconnector flows remaining muted as NBP maintains a premium, and LNG sendout steady at 38 mcm/day. Three additional LNG cargoes are expected to arrive by 9 November, following one received at South Hook yesterday.
Broader commodity markets remain active amid global uncertainties. UK power prices showed strength as natural gas prices rose, with the UK Front Month Baseload at £86/MWh. Meanwhile, global coal prices for ARA CIF Cal 2025 settled at $122.26/tonne, highlighting continued strong demand. The GBP/EUR exchange rate currently stands at 1.1896, maintaining relative stability against this backdrop of volatility. These price movements reflect an intricate market where geopolitical and supply factors heavily influence the balance of supply and demand.