Energy Market Update - 24 September 2024
UK energy prices have opened generally flat today despite lower demand and a long gas system, supported by strong wind generation and increased gas flows from Norway.
The UK gas system is 14.2mcm long, as forecast demand has reduced to 158.3mcm, down by 10mcm from Monday. While cooler temperatures have driven up Local Distribution Zone (LDZ) demand by 5mcm, stronger wind generation has offset gas demand for power, reducing Combined Cycle Gas Turbine (CCGT) generation by 15mcm. Langeled flows have increased from 62mcm to 73mcm, contributing to a healthier supply outlook.
Maintenance at the BBL pipeline continues to limit the UK’s export capacity to the Netherlands, while Norwegian export levels remain steady at 269mcm/day. Temperatures are expected to drop further this week, which could boost heating demand, although increased wind generation is likely to continue moderating gas-for-power demand. The UK is also expecting three LNG cargoes from Qatar, with the first arriving tomorrow at South Hook, adding further support to supply.
In European gas markets, prices edged higher yesterday amid cooler weather forecasts and ongoing geopolitical uncertainties, including the unresolved transit gas agreements through Ukraine and a potential hurricane in the US. The TTF Front Month contract settled at €36.21, while the NBP Front Month settled at 87.10p, reflecting the general bullish sentiment. EU gas storage remains robust at 93.72% full, keeping supply fears in check.
On the power side, UK Day-Ahead Base power is priced at £81.40/MWh. Expectations of strong wind generation, revised upwards for October, are putting downward pressure on power prices despite bullish gas markets. Brent crude oil is trading at $73.90/bbl, with continued market volatility due to tensions in the Middle East.