Energy Market Update - 21 June 2024

Energy markets showed a downward trend yesterday due to resolving supply issues and new sanctions against Russia.

Brent crude prices continued their upward trend throughout June, rising by $0.64 to settle at $85.71 per barrel. This increase was driven by expectations of interest rate cuts by the U.S. Fed and the Bank of England later in the summer, which lifted demand forecasts. The overall sentiment was positive due to the anticipated partial recovery in consumption demand for the rest of 2024.

Gas prices in the UK and continental Europe softened slightly on Thursday, with the Wheatstone LNG plant in Australia signaling an earlier-than-expected restart. This eased pressure on the global LNG market, reducing price competition for European destinations. However, the market maintains a significant risk premium due to the unclear impacts of the Uniper-Gazprom court ruling on third-party gas supplies into Europe. Despite these concerns, Gazprom continues to supply gas via the Turkstream pipeline.

Power prices followed the gas market's trend, with UK prices dropping significantly. The front-year UK carbon price fell by 7.7% due to increased speculative trading and heavy sell-side pressure. This decrease contributed to a reduction in the outright price spread of thermal generation, notably dropping the Winter 2024 contract by £1.95/MWh to £88.42/MWh. This was further influenced by the overall market sentiment and lower demand expectations.

In the broader market, the TTF Front Month contract settled at €34.46, down from €35.34, and the NBP Front Month contract at 80.39p, down from 82.86p. UK power prices also showed a decrease, with the Front Month Baseload contract at £73, down from £74, and the Front Season at £89, down from £90. The market's equilibrium remains stable, with minor adjustments reflecting cautious optimism amid mild weather and steady supply conditions.