Energy Market Update - 27 September 2024
UK energy markets saw a mix of upward movements, driven by ongoing Norwegian maintenance and geopolitical factors. Gas prices remained elevated while power prices showed volatility across different contract durations.
Natural gas prices in the UK continued to rise, with the NBP Day-Ahead contract settling at 89.80p/therm. The extension of maintenance on Norwegian assets is a key driver, with reduced gas flows from the region leading to a curtailment of between 40 and 62.5mcm/day until the end of September. Total Norwegian exports to Europe stood at 272mcm/day, with 65mcm/day heading to the UK. This supply shortfall, combined with rising demand and concerns over LNG availability, bolstered curve prices. Global geopolitical tensions, including concerns over gas supplies via Ukraine and tightening LNG markets in Asia, have further contributed to bullish price movements.
UK power prices saw a decline on the day-ahead market, with the base price settling at £54.38/MWh. However, power demand is expected to rise in the coming days as lower wind speeds increase reliance on gas-fired power stations. Norwegian gas flows to the UK have improved, with the Langeled pipeline seeing higher utilisation. The arrival of two LNG cargoes from Qatar and the high levels of European gas storage (currently at 93.98%) are helping to stabilise supply, though risks remain from unplanned outages, such as the ongoing issues at the Åsgard field, curbing 10mcm/day until 30 September.
In the wider energy market, Brent crude prices dropped slightly to $71.60/bbl, reflecting fluctuations in global oil demand and supply expectations. Coal prices remained steady at $121.01/tonne, while carbon prices continued their upward trend, with EUA Dec 2024 contracts rising to €66.52/tonne. The strengthening of the British pound against the euro, now at £1.1986/€, provided some relief for UK energy importers, though currency volatility remains a potential risk factor for future pricing.
Geopolitical developments continue to influence energy markets, with the UK’s recent sanctions on Russian LNG and concerns over the potential expiry of the gas transit agreement between Russia and Ukraine adding uncertainty to supply outlooks. The European gas storage levels and inbound LNG cargoes are providing some short-term security, but the market remains sensitive to potential supply disruptions, especially with the approaching winter season.