Energy Market Update - 22 October 2024
Energy markets saw a mixed start this week with slight increases in gas and power prices driven by supply adjustments and seasonal demand expectations.
Natural gas prices experienced modest gains due to the anticipation of cooler temperatures and minor alterations to the Norwegian maintenance schedule. The TTF Front Month contract rose slightly to settle at €40.02, while the NBP Front Month contract increased to 100.15p/therm. Day-ahead prices also climbed marginally, supported by reduced temperatures in North West Europe and revised weather forecasts hinting at a colder end to October. The UK system remained undersupplied by around 10 mcm/day, influenced by reduced UKCS production and lower LNG send-out, offset slightly by increased Norwegian flows via Langeled. EU gas storage is currently at 95.31% capacity, highlighting strong regional storage levels amidst these fluctuations.
In the UK power market, prices continued their upward trend. The UK Front Month Baseload contract increased to £87/MWh, with the spot base price surging to £89/MWh. Gains were supported by the revision of wind output forecasts, with front-week wind generation now set to average 10 GW, a normal level for this time of year. The 2GW IFA1 interconnector between the UK and France is temporarily operating at half capacity due to ongoing construction but is scheduled to resume full operations on Thursday. This is expected to relieve some pressure on the UK’s domestic power generation, which remains stable despite intermittent demand spikes.
Globally, supply chain dynamics in the LNG sector are facing delays, with key projects pushed back from 2025 to 2027. TotalEnergies confirmed that some of its projects have been rescheduled, citing challenges linked to the US political environment and broader economic considerations. LNG arrivals to the UK are expected to total two vessels in the coming weeks, while European and Turkish LNG imports are projected at 1.9 bcm this week, a 13% decline from the previous week. The current stability in gas flows through Russian routes such as Velke Kapusany and Sudzha, coupled with the Nord Stream's continued unavailability, leaves the market navigating a mixed supply landscape.
Crude oil and carbon prices also saw changes, with Brent crude inching up to $74.29/bbl and EUAs steady at €61.76/tonne. Spot UK gas rose to 101p/therm, while the Front Season NBP contract hovered at 94p. International benchmarks, including Henry Hub and JKM, showed modest gains at $2.31/MMBtu and $13.34/MMBtu, respectively. These shifts come amid well-stocked regional inventories and a steady influx of LNG cargoes, indicating a broadly balanced market as colder weather approaches.