Welcome to our 'Weekly Energy Market' update, where we dissect the latest trends and changes from 27th August to 2nd September 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 exhibited bullish behaviour throughout the week, driven by supply concerns, ongoing maintenance activities, and geopolitical tensions. Power prices followed suit, influenced by fluctuating demand, slower wind speeds, and increased gas-for-power usage.
27/08/2024:
Gas: NBP DA closed at 86.5p/th, up from 85.1p/th. The bullish sentiment was driven by increasing demand and anticipation of upcoming pipeline outages from Norway to the UK. Geopolitical risks also supported prices.
Power: Electricity prices rose to £81.25/MWh, driven by increased gas-for-power demand due to slower wind speeds.
28/08/2024:
Gas: NBP DA increased to 90p/th from the previous close of 86.5p/th. Rising demand, driven by cooler temperatures and reduced wind speeds, added to the bullish momentum, despite an overall loose balance.
Power: Electricity prices climbed to £83.25/MWh, reflecting higher demand for gas in power generation.
29/08/2024:
Gas: NBP DA traded higher at 92.1p/th, supported by an extension of the outage at Kollness and supply disruptions at Freeport LNG. Despite returning nominations at Freeport, supply-side concerns kept prices elevated.
Power: Electricity prices marginally increased to £88.75/MWh, following gas price movements and high gas-for-power demand.
30/08/2024:
Gas: NBP DA dropped slightly to 91.1p/th, as some supply-side risks subsided with the resumption of operations at Freeport LNG. However, ongoing geopolitical tensions maintained an underlying bullish sentiment.
Power: Electricity prices stood at £89.00/MWh, maintaining elevated levels due to continued gas-for-power demand.
02/09/2024:
Gas: NBP DA closed the week on a bullish note, reaching 94.25p/th, the highest year-to-date. Heavy Norwegian maintenance, supply hiccups, and a cooler weather forecast for the upcoming days sustained the bullish trend.
Power: Electricity prices also peaked at £94.25/MWh, driven by higher gas prices and increased demand for gas-fired power generation.
Key Influences:
This week's energy market was shaped by various factors influencing both gas and power prices:
Supply Dynamics:
Multiple pipeline outages and ongoing maintenance in Norway (NCS) significantly tightened supply, contributing to the rise in gas prices.
The temporary shutdown at Freeport LNG due to maintenance issues added to supply concerns, although nominations resumed later in the week.
LNG sendout remained low, with limited cargo arrivals expected in the coming weeks.
Demand Factors:
Local demand remained stable but was bolstered by an increase in gas-for-power demand due to cooler temperatures and slower wind speeds.
Anticipated colder weather from Wednesday onwards suggested further increases in demand, putting upward pressure on prices.
Geopolitical Tensions:
Ongoing geopolitical concerns, particularly related to potential supply disruptions from key regions, maintained a bullish sentiment throughout the week.
The situation in the Middle East and the impact on global supply chains continued to be a point of concern.
Market Sentiment:
The market remained bullish as participants anticipated further supply constraints from upcoming maintenance and geopolitical risks.
Speculative trading on the back of supply fears and anticipated demand spikes also supported higher prices.
How Does This Compare to Last Week?
Gas and Power Market Comparison:
Last Week (19th August - 27th August 2024):
Average Gas Price: 86.38 p/th
Average Electricity Price: £49.54/MWh
This Week (27th August - 02th September 2024):
Average Gas Price: 93.02 p/th
Average Electricity Price: £87.30/MWh
Percentage Changes:
Gas Price Increase: 7.70%
Electricity Price Increase: 76.29%
This week, the average gas price increased by 7.70%, rising from 86.38 p/th to 93.02 p/th. This rise was primarily due to ongoing maintenance on Norwegian pipelines and anticipated supply disruptions, which tightened the market. Additionally, geopolitical tensions and lower LNG sendout contributed to the bullish sentiment, pushing gas prices higher. In contrast, the average electricity price saw a significant increase of 76.29%, from £49.54/MWh to £87.30/MWh. This sharp rise was driven by higher gas prices, increased gas-for-power demand due to cooler temperatures, and reduced wind power generation, leading to greater reliance on gas-fired power plants to meet electricity demand.
Market Forecast for the Upcoming Week
Gas Market:
Supply Dynamics: The gas market is expected to remain tight due to ongoing maintenance on Norwegian pipelines and potential disruptions. LNG sendout will continue to be monitored, with low arrivals keeping the market under pressure.
Demand Dynamics: With cooler temperatures forecasted, demand for gas, both for heating and power generation, is likely to remain strong. The upcoming week will see increased demand, especially with further drops in wind speeds.
Market Sentiment: Geopolitical concerns will continue to play a significant role in market sentiment. Any developments related to supply disruptions or political instability could lead to further price volatility.
Power Market:
Demand Dynamics: As temperatures drop, electricity demand for heating is expected to rise. Coupled with higher gas prices and reduced wind output, power prices are likely to remain elevated.
Renewable Energy Contribution: Wind power generation is forecasted to stay low, increasing reliance on gas-fired power plants. This could continue to drive power prices higher, especially if gas supply remains constrained.
Conclusion:
The energy market is expected to remain volatile, with gas and power prices continuing to trend upward due to ongoing supply constraints, geopolitical risks, and increased demand. Stakeholders should stay informed and closely monitor market developments to make informed decisions regarding their energy needs.
For more detailed insights and personalised advice on managing your energy costs, stay tuned to our weekly updates. Our team is here to help you navigate the complexities of the energy market.
Weekly Oil Market Summary: 27th August - 2nd September 2024
Oil Market Overview
This past week, oil prices experienced fluctuations driven by geopolitical tensions, supply disruptions, and economic indicators from the U.S. and China. Here’s a breakdown of the key movements and factors influencing the oil market:
27/08/2024:
Price Movement: Oil prices settled 3% higher on Monday. Brent crude closed at $81.43/barrel, up $2.41 or 3.05%, while WTI crude rose to $77.42/barrel, up $2.59 or 3.5%.
28/08/2024:
Price Movement: Oil prices fell about 2% as concerns over economic growth in the U.S. and China overshadowed the recent surge. Brent futures dropped to $79.55/barrel, down $1.88 or 2.3%, while WTI crude fell to $75.53/barrel, down $1.89 or 2.4%.
29/08/2024:
Price Movement: Oil prices continued to slide, settling 1% lower on Wednesday. Brent crude fell to $78.65/barrel, down 90 cents or 1.13%, while WTI crude dropped to $74.52/barrel, down $1.01 or 1.34%.
30/08/2024:
Price Movement: Oil prices rebounded, gaining more than $1 per barrel. Brent crude closed at $79.94/barrel, up $1.29 or 1.6%, while WTI crude increased to $75.91/barrel, up $1.39 or 1.9%.
02/09/2024:
Price Movement: Oil prices retreated on Friday, with Brent crude settling at $78.80/barrel, down $1.14 or 1.43%, and WTI crude falling to $73.55/barrel, down $2.36 or 3.11%.
Key Influences on the Oil Market This Week:
Geopolitical Tensions: The oil market was significantly impacted by geopolitical risks, particularly in the Middle East and Libya. The threat of conflict involving Iran and its proxies, alongside the shutdown of Libyan oil fields, created supply concerns that supported prices.
Supply Disruptions: Production cuts in Libya and Iraq’s plans to lower output as part of OPEC commitments added to supply-side worries. These factors played a critical role in maintaining a bullish sentiment at the beginning of the week.
Economic Indicators: Concerns over economic slowdowns in the U.S. and China led to fears of reduced oil demand, contributing to the mid-week decline in prices. The rise in U.S. unemployment and economic shrinkage in Germany underscored worries about global economic health.
Market Sentiment: Expectations around U.S. Federal Reserve interest rate cuts influenced oil prices. While hopes of economic stimulus initially supported the market, dwindling expectations of a significant rate cut weighed on prices by the end of the week.
Market Forecast for the Upcoming Week:
Looking ahead, the oil market is expected to remain volatile, influenced by a combination of economic indicators and geopolitical developments:
Geopolitical Risks: Monitoring the situation in Libya and the Middle East will remain crucial. Any escalation in conflict or further supply disruptions could drive prices higher.
Economic Indicators: Key economic data from the U.S. and China will be closely watched. Signs of economic strength or weakness will influence market sentiment and expectations for oil demand.
Supply Dynamics: The market will be attentive to any announcements from OPEC+ regarding production adjustments. Any indication of increased supply could exert downward pressure on prices.
Market Sentiment: Investor reactions to economic data, geopolitical events, and OPEC+ decisions will drive market movements. The potential for further volatility remains high as these factors play out.
The oil market is expected to see 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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