Energy Market Update - 18 October 2024
UK gas prices opened slightly lower today and continued to decline throughout the morning, driven by lower demand and stronger wind generation.
Total UK gas demand remains at 175 mcm, similar to Thursday but 20 mcm below seasonal averages. Milder weather and ample renewable generation have helped maintain system balance. Gas storage sites have alternated between injection and withdrawal to help manage supply, with flows from the Langeled pipeline and UK Continental Shelf down by around 4 mcm/day. Warmer temperatures and stronger wind generation are expected into the weekend, likely keeping prices under downward pressure into next week.
Global geopolitical tensions continue to influence energy markets. The ongoing conflict between Israel and Hamas has escalated, with the recent killing of a key Hamas leader. While direct impacts on energy infrastructure remain limited, the unrest raises concerns over broader Middle East stability, which could affect oil flows from the region. Despite a 2.2 million barrel drawdown in US crude stocks, Brent oil prices held steady at $74.45 per barrel, with the market largely absorbing geopolitical risks for now.
Norwegian gas flows to the UK have fallen by 4 mcm/day due to maintenance and outages, including an extended disruption at the Oseberg field. Continued maintenance at Gullfaks and the UK Continental Shelf is keeping supply tight, though these issues are expected to resolve soon. The extension of the unplanned outage on the FR-UK IFA2 interconnector has further tightened UK power supplies, adding upward pressure to prices. However, forecasts for milder weather and strong wind speeds are expected to mitigate demand and stabilise the market.
In Europe, gas storage remains healthy, with EU levels at 95% capacity. However, the Nord Stream pipeline remains offline, and Russian gas flows through Ukraine continue at reduced levels due to ongoing geopolitical tensions between Russia and the EU. This has sustained European gas prices, though mild weather across the continent and ample LNG imports are helping to alleviate immediate supply risks. UK gas day-ahead prices have fallen to 96.00 p/therm, while UK power day-ahead prices settled at £86.58/MWh.