Energy Market Update - 17 June 2024

UK energy prices have seen a downward trend today due to weak demand, easing maintenance restrictions on the Norwegian North Sea, and rising power imports from the Continent.

In the oil market, crude prices settled slightly lower on Friday, impacted by a survey showing deteriorating U.S. consumer sentiment. However, prices rose 4% over the week, driven by solid demand forecasts for crude oil and fuel in 2024. The U.S. EIA upgraded its oil demand growth estimate for 2024, and OPEC maintained its forecast for a 2.2 million bpd growth. A strengthening US dollar also limited demand by making dollar-denominated commodities more expensive.

Gas markets are focused on the competition for supplies, especially as Asia experiences a heatwave and maintenance continues at Australia’s Wheatstone LNG facility. UK gas demand is significantly below seasonal averages, with Day-ahead gas trading down more than 1% to 83 p/th. The market is also affected by the ongoing unplanned outage at the Visund field, expected to continue until 24 June, and a significant decrease in Norwegian exports.

In the power market, UK power prices fell on Friday, influenced by weaker near curve gas prices and a reduction in UKA values. Current UK demand averages 27.4GW, which is below the 2019-2023 average. October '24 Annual gas and Baseload electricity prices have dipped 1% to £83/MWh. Elexon's forecast for wind farm generation has increased to nearly 5 GW, although this is expected to decrease for the remainder of the week.

Overall, the market reflects cautious optimism tempered by mild UK weather, lower gas demand, and stable supply conditions. The EU's failure to agree on a new sanctions package targeting Russian LNG and continued maintenance and outages in Norwegian fields add complexity to the market landscape as spring progresses.