Energy Market Update - 06 December 2024
The UK energy markets opened lower today, continuing this week’s trend, driven by weaker demand, improved weather forecasts, and a strong schedule of LNG arrivals.
In the gas market, NBP Day-Ahead prices settled at 114.50p/therm, reflecting bearish fundamentals, including steady Norwegian imports at capacity and robust LNG send-out. Front-month gas contracts traded as low as 115p/therm this morning, with 12 LNG vessels scheduled to arrive before month-end. However, potential delays are anticipated due to Storm Darragh, which could disrupt docking. EU storage has decreased by 3.3% week-on-week, standing at 83.61% full, signalling adequate reserves despite a slight drop.
The power market saw UK Day-Ahead Base prices at £77.75/MWh, down from previous highs, as mild weather and strong wind generation reduced demand. However, forecasts indicate colder-than-normal temperatures and weaker wind output from the weekend, which may push up gas-for-power demand. Front-month baseload contracts remained steady at £99/MWh, while the front-season price held at £83/MWh. A scale-back in offshore wind investment by a major firm highlights challenges in renewable expansion.
Geopolitical developments continue to impact the market, with Russia’s new decree altering payment mechanisms for gas purchases. This, coupled with OPEC’s decision to maintain production cuts at 2.2 million barrels per day until March 2025, has kept Brent crude stable at $72.09/bbl. Carbon prices saw marginal declines, with EUA Dec-24 at €67.34/tonne. Overall, energy markets reflect a cautiously bearish sentiment as supply remains secure amidst evolving global and regional dynamics.