Energy Market Update - 30 August 2024
The energy market presented mixed price movements today, primarily driven by ongoing supply constraints and geopolitical factors, particularly in the natural gas and oil markets.
In the natural gas sector, the UK day-ahead price edged slightly lower to 91.10p/therm. This decline comes despite the UK gas system being short by 17mcm/day, a result of reduced Norwegian gas exports due to extended maintenance activities. Flows through the Langeled pipeline have notably decreased, with UKCS terminal receipts also lower, adding to the supply-side pressure. However, the market remains relatively stable as European gas storage levels continue to be robust at 91.98%, providing a buffer against supply disruptions. The October NBP contract opened near the previous month’s close, at 94.70p/therm, indicating limited immediate impact from the supply concerns.
UK power prices saw an increase in the day-ahead contract to £88.37/MWh, influenced by the reduction in gas prices but also by the UK's tight supply conditions. The ongoing Norwegian maintenance and lower UKCS flows are contributing to concerns over gas availability for power generation, which has provided upward pressure on short-term power prices. However, temperatures are forecasted to rise above seasonal norms, which could reduce demand and counterbalance some of the price pressures.
In the oil market, Brent crude climbed to $79.94/bbl, reflecting concerns over potential supply shortages due to continued output cuts in Libya and fears of further disruptions in the Middle East. These geopolitical risks have heightened market sensitivity, with oil prices reacting to any news that could impact global supply. This increase in oil prices also puts indirect pressure on gas and power markets, as higher oil prices often lead to increased production costs across the energy sector.
EU carbon prices remained steady at €71.06/tonne, as the market balanced between stable demand and minor fluctuations in associated energy markets. The relatively stable carbon prices suggest that, despite the volatility in gas and oil markets, there has been no significant shift in overall emissions or energy generation patterns.
Overall, the market is driven by a combination of supply constraints, particularly in gas due to Norwegian maintenance, and geopolitical factors influencing oil prices, with these dynamics playing a key role in shaping today's energy price movements.