Energy Market Update - 07 May 2024

The UK energy market observes a downturn in the NBP front month Jun-24 contract, trading at 76.50p/therm, influenced by lower wind levels and continued maintenance in Norway. Warm temperatures reduce demand, counterbalancing fears of restricted LNG supply and global competition.

The UK gas system maintains a slight oversupply at 4mcm despite restricted flows from Norway's Langeled, operating at less than half its capacity. This overcapacity is echoed in lower-than-seasonal demand due to continued warm weather, sitting 60mcm below norms. However, the Gorgon LNG plant outage and rising Asian demand may pressure European LNG supplies.

Wind energy's below-normal forecast could elevate Day Ahead (DA) prices, as gas for power demand increases. This is intensified by geopolitical tensions affecting oil markets, with Brent crude prices rising due to Middle East conflicts and Saudi Arabia's export pricing adjustments. Early May bank holiday trading could see UK markets adjusting to catch up with European gains.

Overall, the market presents mixed signals with the TTF front month at €32, and UK gas NBP spot prices up to 82p. Energy majors report lower-than-expected Q1 profits, hinting at broader market uncertainties.