Energy Market Update - 10 May 2024

Oil prices reached a one-week high on Thursday, driven by growing demand from major consumers China and the United States. China's crude oil imports increased by 5.5% year-over-year in April, marking the highest level for the month in six years. Concurrently, Chinese exports and imports showed growth, signalling rising domestic and international demand.

In the gas sector, prices rose slightly due to reduced Norwegian exports, with pipeline flows now at 289 mcm/day. However, warmer-than-average conditions expected across Europe for the next fortnight could limit price increases by enabling storage replenishment. The UK power curve also rose, influenced by low renewable generation and a downward revision in wind forecasts.

The NBP front month Jun-24 contract traded at 76.85p/therm, while the Win-24 contract was at 95.80p/therm. The UK system remains in surplus with demand trailing the seasonal normal by 70 mcm. With temperatures above average, reduced wind generation has temporarily pressured day-ahead prices, but an anticipated rise in wind output after Sunday is expected to relieve this.

Reports from Freeport indicate a normalization of LNG supply, potentially adding a bearish tone to the market. However, the broader energy landscape remains complex, with potential bullish signals from China's economic growth and expectations of US interest rate cuts, hinting at a dynamic summer ahead for energy markets.