Energy Market Update - 19 December 2024
European energy markets exhibited mixed dynamics yesterday, with natural gas and power prices easing amidst stable supply and mild weather, despite ongoing geopolitical uncertainties.
Natural gas prices fell slightly across major European hubs. The UK NBP Front Month contract declined to 101.50 pence per therm, while the TTF Front Month settled at €41.01/MWh. Reduced demand, due to mild weather and robust wind generation, pressured prices. Norwegian pipeline flows remained stable at 337mcm/day despite ongoing outages at Kollsnes and Kårstø, with the latter’s return now delayed until 24 December. EU gas storage levels dipped further to 77.09%, while LNG supply remains ample, with eight cargoes scheduled for arrival in the UK by year-end.
Power markets mirrored the gas trend, with UK spot baseload prices dropping to £63/MWh and Front Month contracts settling at £88/MWh. Mild temperatures, strong wind generation, and rising nuclear output in France and the UK contributed to reduced gas-for-power demand. However, forecasts indicate wind generation will decrease next week, potentially supporting prices. Cross-border electricity flows remained limited due to ongoing interconnector outages, including the Britain-to-Netherlands link and Eleclink, restricting market flexibility.
Geopolitical concerns continued to influence market sentiment. Traders digested Tuesday’s news about the potential discontinuation of Russian gas transit via Ukraine, with limited updates from ongoing discussions. The Slovakian Prime Minister is scheduled to meet EU Commission officials to explore alternative solutions. Meanwhile, Europe braces for temperatures nearly 5°C above seasonal norms in the coming days, a factor expected to suppress gas demand during the typically low-consumption festive period.
Looking ahead, a combination of bearish weather conditions and robust LNG supplies suggests continued pressure on near-term contracts. However, geopolitical uncertainties and potential reductions in renewable generation could temper this trend, keeping markets sensitive as we approach the new year.