Energy Market Update - 08 October 2024
The energy market remains volatile today, driven by geopolitical concerns in the Middle East and fluctuating supply fundamentals across Europe.
UK and European gas markets opened slightly lower, with the NBP day-ahead contract trading at 100.00p/therm. The front month NBP contract is at 99.95p/therm, down from yesterday’s 100.86p/therm. Norwegian gas flows are steady at 309.6mcm/day despite continued unplanned outages at Asgard and Troll. European gas storage stands at 95.56% full, while UK storage lags at 60.16%. Cooler temperatures expected in the UK for the next few days are pushing up short-term demand, while wind generation remains above seasonal norms. LNG send-out has decreased to 11mcm/day, with three vessels expected in the next two weeks. The ongoing conflict in the Middle East continues to add risk premium across energy commodities, particularly with Brent Oil rising to $80.93 per barrel.
UK power prices have shown a similar trend, with the day-ahead Baseload contract at £89.09/MWh and the front month Baseload at £87/MWh. Wind generation is set to remain high for the next two days before fluctuating around seasonal norms. Gas-fired generation continues to dominate the UK’s power stack amid reduced LNG imports and tightening domestic gas storage levels. European power prices have generally followed the downward trend in gas markets, although French PEG spot prices have diverged slightly due to localised supply issues.
In the oil market, Brent crude futures for the front month are trading at $80.93 per barrel, reflecting rising tensions in the Middle East. While Iranian crude operations have not yet been targeted, there is growing concern about the potential impact on the 4 million barrels per day that Iran contributes to global supply. This geopolitical uncertainty, coupled with market expectations of possible strikes on Iranian oil infrastructure, continues to lift oil prices, which had previously hovered around $79 per barrel.
Other commodities have followed the general downward trend. Coal (ARA CIF) for Calendar Year 2025 is priced at $127.25/tonne, while EU carbon prices (EUAs) hit a six-month low at €61.76/tonne. The UK pound is trading at £1.1916 against the euro. Meanwhile, Asian LNG markets have been slightly stronger, with the JKM benchmark at $13.224/MMBtu due to increasing activity as Chinese buyers return from national holidays. The combination of tightening fundamentals, rising demand, and continued geopolitical instability suggests that the energy market may remain unpredictable in the near term.