Energy Market Update - 22 March 2024

The UK energy market observed a downturn, driven by forecasts of warmer weather and an increase in wind generation. UK gas prices witnessed a decline across the curve, particularly affecting prompt and near curve contracts due to anticipations of warmer, windier conditions and sustained LNG supply.

The UK system opened significantly long due to above-seasonal-normal temperatures, which are expected to dip slightly, bringing colder conditions. Despite minor reductions in Norwegian gas exports, the UK LNG outlook remains steady with four cargoes expected by mid-April. EDF's maintenance extensions at Blayais-2 and Chinon-3 reactors have not impacted the overall higher average output observed in March. The domestic gas market responded to these developments, with NBP and TTF contracts adjusting accordingly, reflecting a cautious market sentiment amidst these changes.

Renewable energy contributions are set to increase, with wind generation expected to peak significantly, aligning with seasonal norms. This shift, coupled with mild weather forecasts for April, suggests a stabilization in energy demand and supply dynamics. The maintenance of interest rates by the US Federal Reserve and global economic pressures have led to a retreat in oil prices from recent highs, underscoring the broader market’s reaction to economic and environmental variables.

Looking forward, the energy market is poised for a period of adjustment as it responds to evolving demand patterns, maintenance schedules, and the influx of LNG cargoes. This landscape is further complicated by the stable yet watchful oil and gas markets, which reflect ongoing global economic considerations and energy security priorities.