Energy Market Update - 11 December 2024
Energy markets experienced mixed movements today, with natural gas prices generally easing due to increased supply from LNG arrivals, while power prices surged amid low renewable generation and colder weather conditions.
Natural gas prices in Europe have softened slightly following a bearish start to the week. UK NBP spot gas is trading at 110.10p/therm, while the TTF spot price is at €44.88/MWh. Improved LNG supply has contributed to this downward pressure, with 11 LNG cargoes expected to arrive in the UK before the end of the year. The NBP maintains a premium to TTF, making the UK a competitive destination for LNG. However, gas demand for power generation has risen due to low renewable output caused by colder weather and reduced wind speeds, while Norwegian supply remains constrained by outages at Asgard and Kollsnes, reducing flows by 20 mcm/day.
Electricity prices, on the other hand, have risen sharply across Europe. UK day-ahead power prices climbed to £198.72/MWh amid limited wind generation, which accounted for only 7% of total output, while combined-cycle gas turbines (CCGT) generated nearly 60% of the UK’s electricity. German and Dutch power prices also saw similar upward pressure. The reduced nuclear capacity and colder weather have compounded the impact of low renewables, driving power prices to their highest levels in months. UK power base spot is now £174/MWh, up significantly from previous levels.
Geopolitical and supply dynamics are shaping the market outlook. While European gas storage remains robust at 81.54% capacity, concerns linger over potential disruptions to Russian flows in January. Additionally, LNG cargoes are being diverted to Asia due to competitive spreads, posing a risk to European supply security during colder months. In the coming days, nuclear output in the UK is expected to rise, and forecasts predict milder temperatures, which may provide some relief to power and gas markets.