Energy Market Update - 26 September 2024
Gas and power prices edged higher on Thursday, driven by colder weather forecasts, extended Norwegian outages, and escalating geopolitical tensions in the Middle East, sustaining recent upward price trends.
UK gas markets continued their recovery from last week’s price crash. The NBP Q4 contract gained 3.69p/th, settling at 94.06p/th, surpassing pre-crash levels. LNG inflows into Europe remained low, with under 20 TWh discharging this week, the lowest since 2021. High storage levels and steady demand in North-East Asia have curbed European LNG supply. Heightened tensions in the Middle East, particularly concerns over potential Israeli military actions in Lebanon, have introduced additional risk premiums, reminiscent of last year's temporary closure of Israel’s Tamar gas field.
Norwegian supply constraints persisted, with unplanned outages at Karsto, Asgard, and Sleipner, leading to lower gas flows into Europe. Norway's total exit nominations were recorded at 267 mcm/day, down from 275 mcm the previous day. UK gas flows remain tight, and the system opened 6 mcm short, despite reduced demand. Russian pipeline flows through Velke Kapusany and Sudzha remained steady, while the Nord Stream pipeline remains unavailable. EU gas storage remains robust, standing at 93.90% full, providing some cushion against supply disruptions.
UK electricity prices reflected similar upward momentum. The UK Front Month Baseload contract rose to £75/MWh, while the Front Season contract moved up to £81/MWh, supported by lower gas generation as wind output increased. The UK Power Base spot price softened slightly, falling to £76/MWh from £86/MWh, driven by reduced demand. However, the colder weather forecasts for early October are expected to prop up demand, particularly for heating, in the short term.
In the broader energy landscape, Brent crude oil prices slipped to $73/bbl, reflecting global supply uncertainties. Carbon prices (EUAs) also edged up, with the Dec 2024 contract closing at €65/tonne, driven by stronger demand for emissions permits. Henry Hub natural gas increased to $2.64/MMBtu, while the JKM benchmark for Asian LNG rose to $13.10/MMBtu, highlighting expectations of tighter markets as winter approaches.