Energy Market Update - 17 October 2024
UK and European energy markets showed mixed performance yesterday, with gas prices rising slightly due to ongoing Norwegian outages, while power prices softened amid steady wind generation forecasts.
Gas prices fluctuated as the UK spot market gained, supported by increased demand expectations heading into the weekend, despite a fall in day-ahead demand. A compressor failure at the Oseberg field and its subsequent maintenance saw flows drop to 20 mcm/day, while overall Norwegian supply held steady at 327 mcm/day. Russian flows through Velke Kapusany remained unchanged at 38.5 mcm/day, while EU gas storage hit 95%, keeping LNG imports subdued for now.
Power prices in the UK increased significantly on day-ahead contracts, reaching £89.60/MWh, but fell slightly across the curve. The rise in spot prices was driven by lower wind generation forecasts, which were below seasonal averages but expected to recover by the weekend. UK gas-fired power generation rose by 8 mcm/day, helping meet demand as renewable output struggled. Wind generation is forecasted to peak at 16,000 MWh/h on 20 October before tapering off.
Geopolitical tensions continue to influence energy markets. Concerns over Russian supply remain heightened due to potential risks in Eastern European transit routes, particularly through Ukraine, amidst ongoing regional instability. While Russian gas flows via Velke Kapusany have remained stable, the threat of further disruptions continues to loom, influencing risk premiums across gas contracts. Meanwhile, Norway’s pivotal role as Europe’s largest gas supplier has been underscored by repeated supply interruptions, such as the Oseberg field outage, which adds further pressure on market prices. On the global stage, the Israel-Hamas conflict has stirred uncertainty in energy markets, contributing to sustained upward pressure on oil prices, with Brent crude hovering at $74.22/bbl.