Energy Market Update - 09 October 2024
UK gas and power markets opened lower today, continuing the downward trend seen in yesterday’s session. Geopolitical tensions in the Middle East and Eastern Europe are maintaining a significant risk premium in the market.
Natural gas prices declined, with the NBP November-24 contract trading at 96.80p/therm and the Summer-25 contract at 93.00p/therm. The ongoing conflict between Israel and Hamas continues to influence market sentiment, as today’s scheduled meeting between the US and Israeli government raises concerns over further military action, potentially affecting global oil supply. Iran, a key oil producer, could face further sanctions or disruptions, which may increase pressure on energy markets. Meanwhile, the UK system remains long by 19 mcm, but cooler-than-normal temperatures forecast for the weekend are expected to raise gas demand. Wind generation is also below average, which could add upward pressure on prices. Despite heightened global demand, LNG supply to Europe and the UK remains stable, with several cargoes expected by mid-November.
UK power prices also softened, with the Day-Ahead Base contract at £81.19/MWh, reflecting the broader market movements. Brent oil prices rose to $77.18/bbl due to ongoing tensions in the Middle East, specifically fears that escalating conflict could target oil infrastructure, potentially disrupting supply. Meanwhile, Western nations, including the US, are wary of a sharp increase in crude prices, which could undermine the fragile global economic recovery post-pandemic. In the coal and carbon markets, prices saw little change, with coal at $125.34/tonne and EUA carbon allowances at €60.29/tonne.
Despite the geopolitical risks, European gas storage remains healthy at 94.61%, supported by steady injections and incoming LNG deliveries. However, the risk of further disruption to gas flows in Eastern Europe, particularly through Ukraine, remains elevated, as Russian gas flows via Sudzha and Velké Kapušany are monitored closely. Meanwhile, maintenance extensions at Norway’s Kristin gas field and outages at Troll continue to affect supply. Markets remain nervous, with traders keeping a close watch on geopolitical developments that could quickly shift the energy landscape.