Energy Market Update - 17 September 2024
UK energy prices saw bearish movement yesterday, driven by strong gas supply and healthy power generation. Mild weather, returning Norwegian flows, and stable EU gas storage levels are contributing to market softness.
Gas prices dropped as Norwegian flows partially resumed following maintenance, with Langeled throughput rising to 39 mcm. Despite an unplanned outage at Oseberg, output remains at 204 mcm. The NBP Front Month contract settled at 81.17p (down from 85.76p), while EU gas storage remains robust at 93.40%. Geopolitical tensions surrounding the ongoing war in Ukraine continue to impact Russian gas flows, with key routes like Nord Stream still unavailable. This has shifted Europe's reliance towards Norwegian supply and LNG imports, including two vessels expected in the UK soon.
UK power prices followed the bearish gas trend, with prompt prices dropping amid eased supply pressures. French nuclear availability, averaging 43.8GW this week, is set to boost capacity, while the IFA2 interconnector outage is expected to end by 20 September, further stabilising supply. Power prices for UK Front Month Baseload fell to £69/MWh (from £73), reflecting these supply dynamics. Longer term, the UK's reliance on gas-fired power plants continues, with government backing aimed at securing energy resilience, particularly in light of Russia's continued influence over global energy markets.
Global geopolitical factors are further shaping energy prices. Brent crude edged up to $73/bbl (from $72), reflecting tightening supply due to production cuts led by OPEC+ and heightened concerns over the conflict in Libya, which could disrupt oil exports. European carbon prices also dipped to €63/tonne, reflecting lower demand across energy markets as warmer temperatures and weaker industrial activity reduce emissions pressure. Additionally, the potential impact of sanctions on Russian energy exports remains a significant factor, keeping the market on alert.
Looking ahead, weather forecasts indicate above-seasonal temperatures in the coming weeks, which may continue to soften demand. Meanwhile, European gas storages remain high, providing a buffer for any potential supply disruptions, including ongoing geopolitical risks related to the Ukraine conflict and Middle Eastern tensions.