Energy Market Update - 22 November 2024
The UK energy market saw gains yesterday as colder-than-average temperatures increased demand, while geopolitical tensions and strong storage withdrawals in Europe added further upward pressure on prices.
Gas prices in the UK closed higher yesterday, with the NBP Day-Ahead contract settling at 121.50p/therm, supported by colder weather and increased demand. Temperatures remain well below seasonal norms, driving system demand to 314 mcm, 66 mcm above typical levels. Storage withdrawals and robust LNG send-outs helped maintain supply security, alongside Norwegian and domestic flows. Escalating tensions in the Russia-Ukraine war, including Russia’s use of new missiles and sanctions on Gazprombank by the US, have introduced uncertainty around gas payments and raised concerns over winter storage levels.
Power prices followed gas upward, with the UK Day-Ahead Baseload contract settling at £104.80/MWh. While higher gas costs provided much of the uplift, nuclear outages added to the supply challenge. Sizewell B2’s offline period has been extended, impacting availability as colder weather increases power generation needs. Stronger wind speeds forecast for the weekend may help offset reduced nuclear output, but intermittent renewables will necessitate reliance on gas-fired power generation to bridge the gap.
Broader energy markets reflect heightened geopolitical risk and seasonal trends. Brent crude rose modestly to $74.23/bbl, while EUA carbon prices increased to €69.99/tonne. EU gas storage remains at 89.4% full, but ongoing withdrawals and competition with Asia for LNG cargoes maintain bullish sentiment. These dynamics, coupled with potential disruptions from the ongoing conflict, signal a complex landscape as the market balances short-term pressures against longer-term supply challenges.