Energy Market Update - 22 May 2024

UK Power prices continued their upward trajectory, driven by higher NBP gas and Carbon prices. UK Solar-power production is set to average 10-20% below the seasonal norm at 2.2GW, while front-week wind output has been revised upwards to 6.4GW, aligning with the seasonal norm.

European gas benchmarks saw gains on Tuesday, reflecting market sensitivity to bullish risks despite a generally stable fundamental outlook. Norwegian maintenance activities have reduced supply, with current flows at 177mcm/day, expected to recover to full capacity by early June. EU Carbon prices reached a four-month high, supporting gas market increases, while Asian LNG prices remained steady but at a premium to European LNG.

The UK system opened 12mcm/day oversupplied this morning, bolstered by increased flows from Norway and upcoming LNG cargoes. The NBP Front Month contract rose to 79.55p, while TTF settled at €33.00. Russian gas flows through Velke Kapusany and Sudzha remained stable, and EU gas storage is at 67.39% capacity. No unplanned outages were reported, maintaining supply security.

Oil prices dropped 1% due to concerns over U.S. inflation and potential prolonged high-interest rates impacting fuel demand. The market anticipates the Federal Reserve's meeting minutes and weekly U.S. oil inventory data for further direction. Key contracts showed the TTF Front Month at €33 and the NBP Front Month at 80p, with UK power prices reflecting cautious optimism amidst stable supply and mild weather conditions.