Energy Market Update - 25 October 2024
The UK energy market continues its bullish trend amid ongoing geopolitical tensions and cooler weather forecasts pushing up both gas and power prices.
Norwegian supply disruptions, with unplanned outages at Oseberg and Sleipner, have reduced total daily flows to the continent to 322 million cubic meters (mcm). This ongoing maintenance, coupled with supply risks from the geopolitical situation in the Middle East and persistent issues at the Ukraine-Russia border, has reinforced the current market strength. Gas markets saw upward movement across all contracts, driven by spot prices now surpassing £1 per therm. The UK NBP Front Month contract rose to 106.38 pence per therm from 103.68 pence, while the TTF Front Month increased to €42.15 from €41.38.
Meanwhile, UK power prices also surged, reflecting the trend in the gas markets. The UK spot price reached £106 per megawatt-hour (MWh), a significant jump from £83 in the previous session, with the Front Month Baseload contract settling at £93/MWh. Lower nuclear output in the UK due to ongoing maintenance is anticipated to persist until early November, while wind forecasts have softened, further tightening the supply. The French nuclear sector, however, has increased production with two reactors back online, boosting generation to over 44 gigawatts (GW).
Elsewhere, LNG deliveries remain a key focus as two cargoes are expected in the UK over the coming days, providing a cushion to domestic supply. European gas storage remains strong at 95.26% full, as recorded by AGSI+, maintaining a buffer despite the current supply disruptions. On the demand side, warmer-than-usual temperatures are expected to cap gas consumption in the near term, yet cooler forecasts for early November suggest a potential uptick in demand, adding to market concerns.
Beyond natural gas and power, other key commodities have also seen price shifts. Brent crude prices hovered at $74 per barrel, with EU carbon allowances (EUAs) climbing to €67 from €65, influenced by rising demand expectations. In global gas markets, Henry Hub saw an increase to $2.52, while the JKM benchmark in Asia rose to $13.72 amid heightened winter supply concerns. This rise in global LNG prices, paired with European supply risks, hints at continued upward pressure on prices in the weeks ahead.