Energy Market Update - 13 May 2024

UK power prices declined on Friday, with the front month contract decreasing by £2.13/MWh to close at £65.12/MWh. In contrast, France is expected to maintain a net power export status due to high wind generation, above-average precipitation, and strong nuclear supply. However, the UK's benefit is limited by the 2GW IFA1 interconnector's reduced capacity. European gas prices also dropped, with the Dutch TTF and UK NBP mirroring movements in the EU ETS market, settling lower.

France's robust power position is offset by infrastructure constraints between the UK and France, while European gas storage remains at 63.9%. Limiting further price drops, Norwegian gas facility maintenance will reduce flows into Europe. Oil prices also fell nearly $1 a barrel, influenced by potential prolonged high U.S. interest rates and rising U.S. fuel inventories, alongside geopolitical tensions marked by a drone attack on a Russian oil refinery.

In the UK, the energy system opened long by 25 mcm/day due to above-average temperatures and low demand. Increased flows from Norway via the Langeled pipeline and reduced LNG sendouts characterize today's supply dynamics. Wind generation is strong but expected to decline later in the week. With one LNG cargo due at Milford Haven soon and more expected in Northwest Europe, supply looks robust despite ongoing geopolitical tensions.

Overall, UK gas and power markets opened lower today due to strengthened supply and diminished demand. The UK system's surplus, supported by a significant increase in Langeled flows and below-average domestic demand, contributes to the downward trend in prices. With oil prices also trending lower amid concerns over Chinese demand and rising U.S. inventories, the market landscape remains cautiously balanced.