Energy Market Update - 26 November 2024
Energy markets turned bullish today, driven by a sharp increase in UK gas demand due to colder weather and reduced wind generation, alongside unplanned global supply disruptions.
UK gas prices have risen amid heightened demand, with colder temperatures and reduced wind generation pushing demand up by 42mcm. Gas-fired power generation requirements surged from 14mcm to 60mcm, creating a supply deficit of 15mcm. The NBP Day-Ahead contract climbed to 119.45p/therm, while the December Front Month contract increased to 120.95p/therm in early trading. The UK’s LNG send-out remains robust at 74mcm/day, supported by 11 vessels expected to arrive over the next ten days. Norwegian flows to Europe stood at 331mcm, while EU gas storage is 87.68% full, ensuring a balanced but tight supply backdrop.
Global factors also contributed to bullish momentum. The unexpected shutdown of Woodside’s Pluto LNG facility in Australia reduced liquefaction by 20mcm/day, raising concerns over spot market competition in Asia and potential knock-on effects on European prices. Meanwhile, geopolitical tensions persist, with Gazprom halting supplies to OMV over payment disputes, likely leading to extended legal disputes. This has added premiums to the forward curve as market participants monitor the stability of Russian flows, currently steady at 41.6mcm through Velke Kapusany.
UK power prices mirrored the gas market, with Day-Ahead Base trading at £110.98/MWh, significantly up from previous levels due to a 20% YoY drop in wind generation this month. Reduced nuclear output, down from 4.1GW last week to 2.3GW due to maintenance, has further pressured the system. Additionally, Brent crude prices eased to $73/bbl as global demand outlooks softened, while carbon allowances rose marginally to €69.86/tonne, reflecting steady demand for compliance amid reduced renewable output.
The market outlook remains complex. Strong LNG arrivals provide a buffer, but colder weather, lower renewable contributions, and geopolitical uncertainty will likely sustain price volatility as the winter season progresses.