Energy Market Update - 20 September 2024
European gas markets experienced a sharp sell-off following reports of a potential gas transit deal between Ukraine and Azerbaijan, which was later denied, prompting a partial price recovery.
The initial reports of an agreement suggested that gas from Azerbaijan would transit through Ukraine after its current deal with Russia expires at the end of 2024. This led to a strong price drop as it temporarily alleviated concerns over supply disruptions. However, when these reports were retracted, the NBP market regained some ground, with the October 2024 contract trading at 81.70p/therm. European gas storage remains healthy at 93.45%, although the filling rate has slowed compared to previous years.
UK energy demand is expected to rise next week as temperatures fall 2-3°C below seasonal norms, which may drive increased gas consumption for heating. The UK is also set to receive three LNG cargoes by 20 October, which should further support supply. Wind power generation is expected to remain stable for the rest of the month, limiting any substantial shifts in power prices due to weather conditions.
On the power front, UK day-ahead prices are currently at £80.08/MWh, reflecting a slight dip from the previous session. Gas-for-power demand is likely to rise as wind speeds decline, adding upward pressure to prices. In Europe, the TTF front-month contract settled at €33.08/MWh, down from €35.25, as gas prices followed the overall market correction. Meanwhile, UK NBP front-month contracts also saw a drop, settling at 79.11p/therm from a previous 84.28p/therm.
Geopolitical uncertainty continues to play a crucial role in price fluctuations, with markets highly reactive to developments in the Ukraine-Russia gas transit situation. As traders await formal confirmation of any agreements, volatility is expected to persist in the coming days. Brent crude remains stable at $74.88 per barrel, while EU carbon prices are at €62.82/tonne, with no significant changes.