Energy Market Update - 07 October 2024
Gas and power prices rose on Friday due to geopolitical concerns and extended Norwegian maintenance. The market remains on edge, with further increases expected in the short term.
UK gas prices saw an upward trend as NBP Day-Ahead (DA) settled at 97.80p/therm, reflecting a rise of approximately 2p/therm. This increase was driven by the ongoing maintenance at Norwegian gas fields, including Troll, Asgard, and Kristin. Despite bearish fundamentals such as robust supply and stable LNG inflows, geopolitical tensions related to Iran’s missile attacks and potential Israeli responses have kept the market volatile. Norwegian gas flows have now surpassed 300 million cubic metres (mcm) per day, while UK imports stand at 58 mcm/day. Gas-for-power usage is rising as temperatures are expected to dip below seasonal averages later this week.
Electricity prices in the UK followed gas trends, with UK DA Base power prices increasing to £76.24/MWh. The UK power market’s rise is linked to higher gas prices and a tightening of supplies. Wind speeds are expected to exceed seasonal norms except for during the weekend, reducing reliance on gas for power. Meanwhile, three LNG cargoes are expected to arrive in the UK by 18 October, adding to the European LNG supply. However, concerns over ongoing geopolitical risks in the Middle East and Ukraine are likely to keep power prices elevated in the near term.
In the wider energy market, Brent oil prices remain relatively stable at $78.05/barrel, while European coal prices saw a slight decrease, settling at $127.79/tonne. EU carbon prices dropped to €62.05/tonne, marking a six-month low, driven by stronger renewable energy output, reduced LNG consumption, and an increase in carbon credit auction supplies. Macroeconomic concerns also weigh on carbon markets, contributing to the fall.
Overall, the energy market is currently shaped by a mix of factors, including colder weather forecasts, Norwegian supply issues, and the ongoing risk of geopolitical escalation. As tensions in the Middle East and Ukraine persist, the potential for price volatility remains high across gas, power, and oil markets.