Energy Market Update - 11 October 2024
Gas and power prices saw upward movement yesterday, driven by colder-than-expected temperatures and ongoing geopolitical developments affecting supply routes.
European gas prices rose, with the TTF Front Month closing at €40.29/MWh, up from €38.34/MWh, and the NBP Front Month increasing to 100.42p/therm from 95.58p/therm. Colder-than-expected temperatures across Northwest Europe have raised demand forecasts, contributing to the price surge. The geopolitical landscape remains a significant factor, as Russia’s gas flows through the Turkstream pipeline to Hungary may increase following a new memorandum of understanding. Hungary hopes to secure additional capacity via Turkstream to offset reduced flows to Ukraine, which could further alter regional supply dynamics.
UK gas prices also saw gains, with the NBP spot rising to 98p/therm from 95p/therm, while UK power prices followed suit. The UK Front Month Baseload contract increased to £87/MWh from £83/MWh. The ongoing geopolitical tensions surrounding the Israel-Palestine conflict, which have drawn in various international actors including the USA, continue to add uncertainty to energy markets. Meanwhile, the UK remains well-supplied, with a 11 mcm/day oversupply this morning due to increased flows via Norway’s Langeled pipeline. However, the market remains sensitive to any disruptions in global gas supply or further escalations in the Middle East.
In broader markets, Brent crude oil rose to $79/bbl from $77/bbl, driven by expectations of increased global demand and fears of supply constraints due to Middle East tensions. EU carbon prices climbed to €65/tonne from €62/tonne, as discussions on stricter emissions targets in the EU gain traction. Russia’s Nord Stream pipeline remains offline, keeping the region heavily reliant on Norwegian flows and LNG imports. European gas storage levels are at 94.74% capacity, but any shift in geopolitical stability, especially regarding the Ukraine conflict and Russia’s supply strategy, could introduce further volatility into the market.
LNG markets were stable, with three vessels expected to arrive in the UK over the next two weeks. However, geopolitical factors remain critical, as any escalation in conflicts or sanctions against Russia could impact LNG routes and prices, particularly with colder weather driving demand. The wider impact of the ongoing nuclear reactor shutdown in Japan, combined with high coal and gas demand in Asia, is keeping global energy markets tight.