Welcome to our 'Weekly Energy Market' update, where we dissect the latest trends and changes from 12th August to 19th August 2024. Your guide through the fluctuations of the last week: revealing trends, insights, and forecasts in the UK energy markets.
Weekly Energy Market At A Glance
Gas and Power Market Overview
The gas market saw notable price movements this week, driven by varying supply dynamics, temperature shifts, and market decoupling from Europe. Power prices fluctuated in response to changes in gas-for-power demand and renewable output.
12/08/2024:
Gas: NBP DA rose by 4p/th to 82p/th, narrowing the spread with TTF-DA to 17.49p/th. Local and gas-for-power demand remained flat, with bullish sentiment due to ongoing maintenance and lower temperature forecasts.
Power: Electricity prices increased to £74.00/MWh.
13/08/2024:
Gas: NBP DA jumped by 3.5p/th to 85.5p/th, further narrowing the spread with TTF-DA to 12.13p/th, driven by improved UKCS production and increased gas-for-power demand.
Power: Electricity prices surged to £81.25/MWh.
14/08/2024:
Gas: NBP DA traded bearish, losing 1.5p/th to close at 84p/th, influenced by loose market conditions and high renewable output.
Power: Electricity prices dropped to £52.00/MWh.
15/08/2024:
Gas: NBP DA plummeted by 6.8%, closing at 78.3p/th, due to oversupply concerns and improved domestic production.
Power: Electricity prices increased slightly to £68.25/MWh.
16/08/2024:
Gas: NBP DA traded sideways, bearish, closing at 78p/th, impacted by higher imports and stable demand.
Power: Electricity prices remained steady at £72.00/MWh.
19/08/2024:
Gas: NBP DA closed 1.5p/th higher at 79.5p/th, with market stability expected in the coming days.
Power: Electricity prices dropped to £52.00/MWh.
Key Influences:
This week's energy market was shaped by a combination of factors impacting both gas and power prices:
Supply Dynamics:
Increased gas flows from Norway and higher UK domestic production, particularly with the return of UKCS fields from maintenance.
Extension of ongoing maintenance at UKCS fields, adding to the bullish sentiment earlier in the week.
Stability in LNG imports, maintaining a steady supply but with limited impact on prices.
Demand Factors:
Fluctuations in gas-for-power demand driven by changes in wind speeds and temperature forecasts.
A slight increase in gas-for-power demand early in the week due to cooler temperatures, followed by a reduction as high winds were forecasted.
Stable local demand, with potential increases expected as temperatures drop below seasonal norms.
Geopolitical Tensions:
Ongoing concerns over potential disruptions in Russian gas flows through Ukraine, influencing market sentiment and contributing to price volatility.
Developments in the Middle East, with potential impacts on global energy markets.
Market Decoupling:
The UK gas market experienced significant decoupling from continental Europe, with a widening of the NBP-TTF spread, indicating different supply-demand dynamics between the two regions.
Temperature Fluctuations:
Cooler temperatures across the UK, leading to varying demand expectations and contributing to shifts in gas and power prices.
These combined factors contributed to the observed trends and movements in gas and power prices throughout the week.
How Does This Compare to Last Week?
Gas and Power Market Comparison:
Last Week (05th August - 12th August 2024):
Average Gas Price: 82.15 p/th
Average Electricity Price: £56.83/MWh
This Week (12th August - 19th August 2024):
Average Gas Price: 83.46 p/th
Average Electricity Price: £66.58/MWh
This week, the average gas price increased by 1.60%, primarily due to ongoing maintenance at UKCS fields, which tightened supply, and a narrowing spread between NBP-DA and its Dutch counterpart, TTF-DA. Fluctuating demand, influenced by cooler temperatures and higher wind speeds, also contributed to the slight rise in gas prices. In contrast, electricity prices saw a more significant increase of 17.14%. This sharp rise was driven by variations in gas-for-power demand, coupled with the impact of renewable energy output. Cooler temperatures throughout the week, combined with reduced wind power generation, further amplified the upward pressure on electricity prices.
Market Forecast for the Upcoming Week
Gas Market:
Supply Dynamics:
Norwegian Flows and Domestic Production: Norwegian exports are expected to remain strong, contributing to a stable supply outlook. Additionally, with Bactor Perenco anticipated to return from maintenance, restoring 10mcm/d of production capacity, the UK market may see a slight increase in domestic production. However, continued strong NCS imports will maintain a loose supply balance.
LNG Imports: LNG imports are expected to remain anchored at around 9mcm/d, providing a steady but limited additional supply.
Demand Dynamics:
Temperature Forecast: The UK is forecasted to experience below-average temperatures, ranging from 15°C to 18°C, particularly between 22nd and 27th August. This cooler weather is likely to increase local heating demand slightly, which could lift overall gas consumption.
Gas-for-Power Demand: Despite the cooler weather, high wind speeds forecasted later in the week could reduce gas-for-power demand as renewable energy generation increases. This could counterbalance any rise in residential heating demand.
Market Sentiment:
Geopolitical Events: The situation in Ukraine and the Middle East remains fluid, with potential risks to gas flows from these regions. Any disruptions could lead to price volatility, particularly if Norwegian or UK supplies do not compensate adequately.
Power Market:
Demand Dynamics:
Temperature Impact: With cooler temperatures expected, electricity demand for heating could see a modest increase. However, this may be offset by the anticipated rise in wind generation later in the week, reducing reliance on gas-fired power plants.
Renewable Energy Contribution: High wind speeds forecasted for the latter part of the week could significantly boost wind power generation, potentially reducing gas-for-power demand. This could keep power prices in check or even lead to a slight decrease if renewable output is strong enough.
Supply Dynamics:
Nuclear and Renewable Output: High nuclear capacity is expected to remain stable, providing a consistent base load. Combined with the expected increase in wind power, the power market may see reduced volatility in the latter half of the week.
Conclusion:
Overall Market Outlook: The gas market is expected to remain relatively stable, with potential slight increases in demand due to cooler temperatures, balanced by strong supply. The power market may see fluctuating prices, driven by varying demand and renewable output. While the early part of the week might experience higher prices due to lower wind generation, the situation could stabilize or even see price reductions as wind speeds pick up towards the weekend.
Weekly Oil Market Summary: 12th August - 19th August 2024
This past week, oil prices experienced significant volatility, driven by a mix of geopolitical tensions, economic data, and supply concerns. Here’s a breakdown of the key movements and factors influencing the oil market:
12/08/2024:
Price Movement: Oil prices settled higher on Friday, with Brent crude futures closing at $79.66 per barrel, up 0.6%, and WTI crude futures rising to $76.84 per barrel, up 0.9%.
13/08/2024:
Price Movement: Oil prices jumped over 3%, marking the fifth consecutive session of gains. Brent crude settled at $82.30 per barrel, up 3.3%, while WTI closed at $80.06 per barrel, up 4.2%.
14/08/2024:
Price Movement: Brent and WTI crude oil futures fell as concerns over a wider Middle Eastern conflict eased. Brent crude dropped to $80.69 per barrel, down 1.96%, and WTI fell to $78.35 per barrel, down 2.14%.
15/08/2024:
Price Movement: Oil prices continued to decline, with Brent crude settling at $79.76 per barrel, down 1.15%, and WTI at $76.98 per barrel, down 1.8%.
16/08/2024:
Price Movement: Oil prices rebounded, with Brent crude rising to $81.04 per barrel, up 1.6%, and WTI increasing to $78.16 per barrel, up 1.53%.
19/08/2024:
Price Movement: Oil prices settled down nearly 2%, with Brent crude falling to $79.68 per barrel, down 1.7%, and WTI dropping to $76.65 per barrel, down 1.9%.
Key Influences on the Oil Market This Week:
Geopolitical Tensions: Fears of a potential conflict in the Middle East, particularly involving Iran and Israel, drove significant price movements. The possibility of U.S. military action and potential sanctions on Iranian crude exports added to supply concerns.
Economic Data: Positive economic indicators from the U.S., including lower-than-expected jobless claims and stronger retail sales, helped support oil prices earlier in the week. However, weaker-than-expected data from China raised concerns about global demand.
Supply and Inventories: Unexpected rises in U.S. crude inventories indicated weaker demand, contributing to downward pressure on prices mid-week.
Market Sentiment: Expectations of a possible interest rate cut by the Federal Reserve helped buoy prices, as lower rates could stimulate economic activity and boost oil consumption.
Market Forecast for the Upcoming Week:
Looking ahead, the oil market is likely to remain volatile, influenced by a combination of geopolitical developments and economic data:
Geopolitical Risks: Continued monitoring of the situation in the Middle East will be critical, with any escalation likely to drive prices higher due to concerns over supply disruptions.
Economic Indicators: Key economic data from the U.S. and China will be closely watched. Positive data could support prices, while any signs of weakening demand, particularly from China, could lead to further declines.
Supply Dynamics: U.S. crude inventory reports and OPEC+ production levels will be important factors in determining market direction. Any significant changes in supply could either exacerbate or alleviate price pressures.
Market Sentiment: Investor reactions to global economic conditions and geopolitical risks will continue to drive market volatility, with potential for sharp price movements in either direction.
The oil market is expected to experience continued fluctuations, with potential for both upward and downward movements depending on the interplay of these factors. For more detailed insights and strategies to manage your energy portfolio, stay tuned to our weekly updates.
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