Energy Market Update - 31 October 2024
Natural gas and power prices eased amid mild weather forecasts and broader energy market weakness, supported by stable supply fundamentals and moderated demand expectations.
Natural gas prices trended lower on Wednesday as subdued demand and broader bearish signals within the energy sector contributed to market weakness. Key contracts across the curve saw substantial losses, with December 2024 front-month prices on the UK National Balancing Point (NBP) falling over 4p/therm (0.14p/kWh) from the previous session. This shift follows an improved demand outlook, with UK temperatures forecasted to remain above seasonal norms until mid-November, reducing near-term demand expectations.
Pressure along the energy curve is further supported by declining carbon and coal prices, which are contributing to broader competitiveness within the market. Carbon EUA and Rotterdam Coal European benchmarks fell by 2.7% and 1.6%, respectively, on ICE. As of this morning, gas prices continued to slide, with the Summer 2025 front-season contract easing by approximately 1p/therm (0.034p/kWh) from the previous close. Power prices in the UK followed this trend, with day-ahead (DA) baseload settling at £92.49/MWh and the NBP day-ahead gas at 100.50p/therm.
The supply-side fundamentals show stable conditions, with Norwegian flows into the UK maintaining high levels, recorded at 337 mcm/day today. UK gas storage remains robust, with storage sites 62.57% full, while EU storage is at 95.22%, supporting security for the winter period. Furthermore, additional LNG cargoes are anticipated to arrive in the UK, with two more shipments expected over the coming week. In power, the recent return of the Torness 1 nuclear unit has added 0.6 GW of capacity, offsetting some demand for gas-fired generation amidst weaker wind speeds.
Mild weather across the UK and Europe has dampened seasonal demand for gas, with UK temperatures predicted to remain above average into mid-November. This week, UK temperatures are anticipated to reach 2-3 degrees above seasonal norms, reducing Low Demand Zone (LDZ) requirements. European markets also saw price corrections, with the Dutch TTF front-month contract settling at €41.38/MWh from €42.87. Conversely, limited wind generation in the UK next week could push gas demand higher for power generation, providing mixed demand signals across the region.
In broader markets, Brent Crude slipped to $72.55/bbl, reflecting easing supply risks after recent Middle Eastern tensions. Carbon prices also moderated, with EU Allowances (EUAs) down to €65.47/tonne. The UK government’s recent allocation of £2.7 billion to the proposed Sizewell C nuclear project further reflects a shift toward energy security, with the potential 3.4 GW output marking a significant future contribution to the UK’s energy supply.