Energy Market Update - 26 March 2024

Most UK energy prices trend lower today, influenced by soft fundamentals overshadowing geopolitical concerns.

April '24 Annual gas prices have decreased by 1% from the previous close, reaching just over 77 p/th, while Baseload power for the same period has fallen by 3% to £70/MWh. In contrast, German April '24 electricity prices have seen a nearly 5% drop to EUR 58/MWh, and Dutch April '24 gas has declined more than 2% to just under EUR 28/MWh. This price movement is supported by a 3% reduction in UK's gas demand forecast to 211 million cubic metres, significantly below the seasonal average, and an indication of up to 14 mcm of gas oversupply this morning, pushing within-day prices down by 3% to 70 p/th and the Day-ahead 2% lower to 71.3 p/th.

UK wind fleet projections suggest an average delivery of 6 GW today, with a significant increase to above 11 GW expected tomorrow. However, this is a dip of more than 10% compared to previous estimates, contributing to an 11% decrease in next-day electricity values to £63/MWh. Additionally, from 28 March to 9 April, wind generation is expected to average 7 GW. Meanwhile, Germany's move to shut down seven lignite-fired power plants by the end of the month reflects ongoing adjustments in European energy markets, with lignite plants having contributed to 16% of German power generation year to date.

The UK gas market opened lower today, shedding most of yesterday's gains influenced by weekend geopolitical events. The front month Apr-24 contract is pricing at 71.60p/th, lower due to warmer weather forecasts and a system oversupply. Despite the low demand and high storage volumes keeping prices in check, the market remains cautious due to limited LNG inflows to Europe and a bullish carbon market. The outlook suggests mixed temperatures and above-average wind speeds, with limited LNG cargo arrivals to the UK in the coming weeks, indicating a complex yet adjusting energy market landscape.