Energy Market Update - 28 May 2024
The energy market sees slight price drops due to increased gas flows and mild temperatures.
In the previous session on 24 May, day-on-day losses were recorded as Gassco flows resumed after significant curtailments earlier in the week. Although maintenance in Norway is ongoing, the impact on piped flow is diminishing as we move into June. An unplanned outage at Kollesnes reduced capacity by 10 mcm/day, but this morning, the impact has lessened. Weaker renewable output supported prices, but spot prices edged lower due to increased flow and milder temperatures. Curve prices also cooled as the market digested previous news from OMV, despite ongoing supply risks.
Today, the UK system opened 8 mcm/day undersupplied due to terminal receipt disruption at Bacton. Increased flow from Norway's Langeled pipeline is observed, while LNG sendout remains flat. Marginal injections are being nominated by MRS. Strong winds are expected this week, potentially subsiding by the weekend. Temperatures are forecasted to stay about 1.5 degrees Celsius above seasonal normal. OMV's statement about meeting contractual obligations despite potential full cessation of Russian supply continues to influence prices.
The market has been on an upward trend since late Q1, driven by bullish fundamentals. The UK gas market opened strong but moved lower, with prices still above Friday’s close after the bank holiday. The front month Jun-24 contract is priced at 82.45p/th, up by 0.4p/th from the previous session. Last week’s statement from Austria’s OMV raised fears of further Russian gas losses to Europe. LNG deliveries to Europe are significantly down, with vessels heading to Asia. Potential delays in the Golden Pass project in the US are also a concern.
The UK system is balanced this morning with total demand at 135 mcm, 68 mcm below seasonal normal. Strong wind generation is limiting gas use for power generation. LNG sendout is nominating at 6 mcm with Langeled flows at 36 mcm. UKCS is nominating at 42 mcm, with small unplanned events affecting capacity. Friday saw the TTF Front Month contract settle at €35.24 and the NBP Front Month contract at 84.42p. This morning, the TTF Front Month contract remains at €35. Key contracts show minor adjustments, reflecting cautious market sentiment amidst ongoing supply uncertainties.