Energy Market Update - 28 October 2024
Energy markets showed mixed movement, with geopolitical tensions and weather forecasts driving market sentiment. Gas and power prices saw fluctuations amidst updates on outages and supply conditions.
The UK NBP and Dutch TTF contracts closed Friday at their highest levels year-to-date, with the TTF Front Month settling at €43.51. This rise in gas prices was driven by colder forecasts for early November and persistent geopolitical risks in the Middle East. Maintenance extensions at Norway’s Karsto field limited flows, while high LNG demand and tight balances continue to support the curve, especially for contracts into 2025. Although UK power spot prices dipped due to lower weekend demand, ongoing outages on ElecLink and IFA2 interconnectors added near-term price support. Current gas flows to the UK sit at 331.5 mcm/day, despite decreased flows from the FLAGS system.
Geopolitical tensions remain a significant market driver. Israel’s weekend attacks, which primarily targeted military sites and avoided oil facilities, eased fears of immediate energy supply disruptions. As a result, Brent oil prices dropped by around 4%, trading at $76.05/bbl in early session today. However, the situation remains fluid, with participants cautious of potential retaliatory moves. On the demand side, the latest EC46 weather model forecasts a warmer period until 2 November, which, combined with below-average wind speeds, may boost gas demand for electricity generation.
Electricity generation in the UK has been impacted by outages in the nuclear sector, but production is expected to increase to 5GW by the weekend as reactors come back online. This is crucial given the low wind output expected into early November. Day-ahead power contracts traded at £92.00/MWh, while the front-month Baseload saw a minor uplift to £95.00/MWh amid the ongoing uncertainties. EU storage remains strong at 95.53%, marginally lower than last year, but well above mandated thresholds, providing some buffer against potential early-season withdrawals.
Gas prices continue to react strongly to evolving forecasts and tight balances, while power prices are influenced by variable renewables and unplanned outages.