Energy Market Update - 18 April 2024

Oil prices fell 3% due to a significant increase in U.S. crude inventories and the prospects of prolonged higher interest rates dampening demand.

In oil markets, U.S. crude stocks unexpectedly doubled analysts' projections, contributing to the price drop. The wider economic context includes heightened interest rates in major economies, potentially curbing corporate investment and energy demand. Meanwhile, gas markets observed volatility, with UK and Dutch gas prices dropping due to resumed flows from Norway. The geopolitical tensions following an Iranian drone attack are causing market unease.

Power markets mirrored the decline in gas prices, though the potential increase in Combined Cycle Gas Turbine (CCGT) demand due to cooler-than-normal UK temperatures provided some support to spark spreads. The ongoing unpredictability was evident as the UK winter gas contract dipped below £1 per therm again, reflecting the market's sensitivity.

Looking ahead, no changes were reported in the Front Month TTF contract, while the UK's gas storage levels and upcoming LNG arrivals suggest a somewhat stable outlook. However, the energy market remains cautious, with ongoing geopolitical issues and infrastructure outages influencing supply dynamics.