Monthly Energy Market Update - 01/08/2023 - 01/09/2023
Introduction: Welcome to our Monthly Energy Market Update for July 2023. In this comprehensive review, we delve into the intricacies of the Gas & Power markets, focusing on the fluctuations and volatility observed throughout the month. We'll be analysing the factors influencing gas and power prices, including supply disruptions, outages, changes in demand, and the impact of renewables generation. Our aim is to provide you with valuable insights into the overall performance and direction of these markets during the review period. Let's get started.
Review of Gas & Power Markets from 01/08/2023 - 01/09/2023
In this post, we provide a comprehensive review of the Gas & Power markets for the month spanning from August 1 to September 1, 2023. This review aims to capture the key market dynamics, including price fluctuations, supply-demand imbalances, and other influencing factors, such as industrial actions and weather patterns. Here, we break down the crucial elements that have shaped the markets during this period.
Gas Market Review for 01/08/2023 - 01/09/2023
UK's NBP Day-Ahead (DA) gas prices experienced a roller-coaster ride this month, opening at 65.00p/th on August 1st and closing at 80.98p/th on September 1st. The highest price recorded was an eye-watering 107.00p/th on August 22nd.
Key Factors Affecting the Gas Market:
Supply Constraints and Outages: These were significant contributors to the higher prices seen in mid-to-late August, driving prices to the 107.00p/th mark on August 22nd.
Weather Patterns: Cooler weather at the start of the month led to decreased demand, reflected in the opening prices. However, fluctuating temperatures contributed to the volatility seen throughout the month.
Market Movement: Opened at 65.00p/th and closed at 80.98p/th, a considerable increase of +15.98p/th or approximately 24.58%.
Power Market Review for July 2023
The power market was similarly volatile, starting at £70.75/MWh on August 1st and closing at £89.00/MWh on September 1st. The peak price reached was £112.00/MWh on August 23rd.
Key Factors Affecting the Power Market:
Gas Prices: The considerable volatility in the gas market also impacted electricity prices, especially when 'gas for power' demand was high.
Renewable Energy Generation: Variable wind speeds and other weather conditions played a role in renewable energy output, affecting electricity market prices.
Market Movement: Opened at £70.75/MWh and closed at £89.00/MWh, a significant increase of +£18.25/MWh or approximately 25.79%.
Market Update: Oil Prices and Market Factors (01/08/2023 - 01/09/2023)
Market Movement
Initial Status: As of August 1, Brent Crude was at $77.36, and WTI Crude was at $73.81.
Final Status: As of September 1, Brent Crude was at $85.86, and WTI Crude was at $81.63.
Trends
Brent Crude: The price increased by approximately $8.5, marking an approximate 11% increase over the month.
WTI Crude: The price increased by approximately $7.82, marking an approximate 10.6% increase over the month.
Significant Events
China's Economic Woes: Concerns over China's economic recovery caused oil prices to fluctuate throughout the month.
U.S. Inventories & Production: U.S. crude stocks showed a significant drawdown, but production also increased, reaching its highest since the pandemic began.
Nigeria’s Forcados Terminal: Resumption of exports from Nigeria’s Forcados terminal, after a month-long halt, had a transient impact on prices.
OPEC+ Production Cuts: Led by Saudi Arabia, OPEC+ decided to extend output cuts, contributing to oil price support.
U.S. Federal Reserve Policy: Mixed signals on interest rate hikes from the Federal Reserve contributed to market uncertainty.
Natural Disasters: Hurricane Idalia in the U.S. put some upward pressure on prices due to concerns about supply disruption.
Other Global Indicators: Weak economic data from Germany, Japan, and Eurozone affected global oil demand outlook.
Impacted Sectors
Refineries: U.S. diesel prices soared and diesel futures reached a near seven-month high.
Automotive: U.S. summer driving season contributed to high demand but ends on the first of September.
Manufacturing: Weak global manufacturing data, particularly in the Eurozone and Japan, impacted the oil demand outlook.
Expert Opinions
Most experts anticipate continued volatility due to conflicting pressures from supply constraints and uncertain global economic indicators.
Snapshot of wholesale market movements
Energy Market Averages
DATE | GAS (pence per therm) | ELECTRIC (£ per MWh) |
Last 7 Days | 85.57 | 91.50 |
Last Month | 83.55 | 86.57 |
Last Year | 132.41 | 139.32 |
Forecast for the Gas & Power Markets
Gas Market Forecast
The UK NBP Day-Ahead gas market is likely to remain sensitive to supply constraints and planned outages in key fields, potentially driving up prices. Weather patterns and demand levels will also be key variables. After closing at a significant 24.58% increase over the past month to 80.98p/th, market participants should brace for a possibly volatile September, especially if supply decreases while demand holds steady or rises.
Power Market Forecast
The power market, closely tied to gas prices, may also witness volatility, especially if 'gas for power' demand remains high. Fluctuating weather conditions affecting renewable energy output will be another factor to watch. Having closed at £89.00/MWh, marking a 25.79% increase over the last month, market players should remain vigilant about supply and demand dynamics.
Oil Market Forecast
The oil market is grappling with a mix of factors, including global economic uncertainties, OPEC+ supply decisions, and potential natural disasters. After experiencing a roughly 11% (Brent) and 10.6% (WTI) increase over the last month, prices remain subject to influences from both supply and demand sides. Continued volatility is expected due to these conflicting pressures.
Last 12 month market movements
Conclusion
In summary, all three markets—gas, power, and oil—are poised for a turbulent September, influenced by a myriad of factors from supply outages to global economic indicators. Market participants would do well to keep a close eye on these developing situations.
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