Energy Market Update - 13 December 2024
Gas and power prices fell yesterday as warmer weather forecasts and rising wind generation weighed heavily on the energy markets heading into the festive period.
In the natural gas market, the NBP spot price settled at 106.18p/therm (down from 110.22p), with the TTF Front Month contract closing at €42.80/MWh. These declines are driven by forecasts of mild temperatures across Northwestern Europe, with expectations for demand to remain subdued. EU storage levels now sit at 80.16%, a drop from 80.90%, reflecting robust withdrawals despite the relatively mild conditions. Norwegian gas flows remain stable at 331mcm/day, although outages at Kollsnes and Kvitebjørn have marginally impacted supply. LNG arrivals continue to bolster supply, with 11 cargoes expected to arrive in the UK over the coming weeks.
In the power market, spot electricity prices have softened significantly following a period of volatility. UK power base prices fell to £157/MWh (from £215), with the Front Month baseload contract settling at £92/MWh. Renewables are the key driver, with wind generation forecast to increase by 24% above seasonal averages. UK wind output is expected to reach 17GW, while Germany’s wind generation is forecast to double the seasonal norm at 48GW today. This has provided downward pressure on near-term contracts, particularly as the warmer weather also reduces demand.
Longer-term concerns persist, however, with EU gas storage levels 10% lower than December 2023, increasing the focus on summer injection requirements to meet the 90% storage target by 31 October 2025. Any unexpected cold snaps this winter could test Europe’s supply resilience, particularly as Russian gas transit through Ukraine remains uncertain. The transit agreement, set to expire on 31 December 2024, has created significant market speculation, with Ukraine stating no extension will be signed. However, political negotiations, particularly involving the incoming US administration, could provide future opportunities for resumed flows.
Elsewhere, Brent Crude prices eased slightly to $73.41/bbl following last week’s gains, while carbon EUAs declined to €66/tonne. The outlook remains bearish for gas and power in the near term, as warmer temperatures and strong renewable output dominate the market dynamics.