Energy Market Update - 29 February 2024

NBP prices witnessed an uplift on Wednesday, gaining approximately 2p/therm, despite a drop in demand attributed to milder weather conditions.

The UK energy system experienced a shortfall, exacerbated by an unexpected delay in the Barrow gas treatment plant's return to operation, resulting in a 6mcm reduction in gas availability. This morning, the system opened 14mcm short, with total gas consumption anticipated at 232mcm, amidst reduced storage withdrawals and unchanged demand levels from the previous day.

A robust power auction in the UK underscored the ongoing significance of gas in power generation, with CCGT gas-fired plants leading the energy procurement. The market anticipates a cold snap starting Friday night into Monday, increasing gas demand, followed by a warming trend post-Tuesday, suggesting fluctuating temperature impacts on gas usage.

Market movements indicate a cautious optimism, with notable increases in both TTF and NBP front month contracts, reflecting a potential market correction rather than a sustained upward trend. With substantial gas storage levels and the winter delivery period winding down, the market may experience volatility, influenced by the uncertain temperature forecasts for the coming months.

Operational challenges persist with the Skarv field's unplanned outage and steady Russian gas nominations, amidst a backdrop of unavailable Nord Stream flows. EU gas storage stands at 63.13%, with four LNG cargoes expected to arrive in the UK soon, hinting at a stable supply despite the current constraints.

Today's contract assessments reveal no change in the TTF Front Month contract, priced at €26, with NBP and UK power prices showing slight adjustments. These figures, along with the upcoming LNG arrivals and the current energy supply dynamics, outline a cautiously optimistic outlook for the UK's energy market as it navigates through the transition from winter to spring.