Energy Market Update - 16 July 2024

The energy market opened soft this week, unwinding the gains from last Friday, with a notable revision in wind forecasts impacting UK power prices.

Freeport LNG is set to restart operations soon following downtime due to a hurricane. This impacts LNG deliveries to the UK and Europe, with no vessels expected in the UK in the coming weeks. Yesterday, the TTF Front Month contract settled at €31.37 (down from €31.72), and the NBP Front Month contract closed at 72.24p (down from 73.12p). This morning, the TTF Front Month contract rose to €32, marking an increase of €1 from the previous settlement.

No unplanned outages were reported this morning, with gas flows at 331 mcm compared to 342 mcm previously. Russian nominations showed Velke Kapusany at 39.9 mcm (from 39.8) and Sudzha at 42.4 mcm (from 42.0), while Nord Stream remains unavailable. EU gas storage is at 81.02% capacity. The UK power market saw the Front Month Baseload contract stable at £64, with the Front Season at £83 (down from £84).

In broader markets, Brent Oil is steady at $85, while EUAs are at €68 (down from €69). Henry Hub fell to $2.16 from $2.33, and JKM prices decreased to $11.95 from $12.33, with TTF Equiv at $10.04 (down from $10.15).

Weather forecasts for the UK indicate temperatures above seasonal norms this weekend, followed by a drop below normal levels for the rest of the month, potentially reducing LDZ demand and allowing for increased storage injections. Wind generation is expected to be below seasonal levels this week, but will increase next week, reducing the need for gas-fired power generation. The UK system remains long this morning, with supply outpacing demand and the latest demand forecast trailing the seasonal normal by nearly 37 mcm.