Welcome to our 'Weekly Energy Market' update, where we dissect the latest trends and changes from 19th August to 27th 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
This week, the gas market saw fluctuating prices, driven by ongoing maintenance, cooler temperatures, and geopolitical tensions. Power prices also varied significantly, impacted by changes in gas-for-power demand and renewable output.
19/08/2024:
Gas: The NBP DA closed 1.5p/th higher at 79.50p/th. Prices were slightly above the 50-day moving average, with expectations to remain stable barring unexpected events. Cooler weather forecasts suggested a potential rise in demand, which could push prices above 80p/th.
Power: Electricity prices stood at £52.00/MWh.
20/08/2024:
Gas: NBP DA prices increased to 86.50p/th, driven by maintenance schedules and cooler temperature forecasts. The spread with TTF-DA narrowed due to expected shutdowns, and concerns remained over infrastructure damage amid geopolitical tensions.
Power: Electricity prices increased to £37.50/MWh.
21/08/2024:
Gas: NBP DA retraced gains, falling 3.95p/th to settle at 85p/th, after a bullish day. Market conditions remained loose with stable consumption but increased gas-for-power demand due to lower wind speeds.
Power: Electricity prices decreased to £30.00/MWh.
22/08/2024:
Gas: NBP DA prices fell again to 84.25p/th, mirroring TTF movements. Despite a loose UK balance, future maintenance on NCS and potential storage withdrawals are expected to impact the market.
Power: Electricity prices increased to £33.50/MWh, indicating higher costs for consumers due to increased demand for gas in power generation as wind power contributions remained low.
23/08/2024:
Gas: NBP DA saw a slight increase, closing 0.85p/th higher at 85.10p/th. The market remained stable with no significant changes in the supply-demand balance, although demand increased by 15mcm/d due to cooler weather and higher gas-for-power usage.
Power: Electricity prices rose to £63.00/MWh, driven by higher demand for gas in power generation. This increase could lead to higher costs for consumers as reliance on gas to generate electricity grew.
27/08/2024:
Gas: NBP DA traded bullishly, closing at 86.5p/th, supported by increased demand and ongoing geopolitical risks. Anticipation of upcoming pipeline outages added to the bullish sentiment.
Power: Electricity prices rose to £81.25/MWh.
Key Influences:
This week's energy market was shaped by various factors influencing both gas and power prices:
Supply Dynamics:
Anticipated maintenance on NCS and pipeline outages, including Langeled's shutdown, raised concerns about future supply constraints.
LNG imports remained stable, but overall supply tightness was expected due to planned maintenance.
Demand Factors:
Cooler temperatures across the UK led to increased demand for gas for heating and power generation.
Reduced wind speeds resulted in higher gas-for-power demand, particularly during the middle of the week.
Geopolitical Tensions:
The situation at Sudzha and developments in the Middle East remained areas of concern, with potential supply disruptions influencing market sentiment.
Ongoing peace negotiations and the risk of escalation in these regions continued to impact prices.
Market Balance:
The UK gas market balance remained relatively loose until the expected start of significant maintenance work at the end of August.
High storage levels at 90% capacity provided some buffer against potential supply disruptions.
Price Fluctuations:
The NBP DA saw both bullish and bearish movements throughout the week, driven by varying demand forecasts and anticipated supply issues.
Power prices fluctuated in response to changes in gas-for-power demand, influenced by temperature and wind speed variations.
How Does This Compare to Last Week?
Gas and Power Market Comparison:
Last Week (12th August - 19th August 2024):
Average Gas Price: 82.15 p/th
Average Electricity Price: £56.83/MWh
This Week (19th August - 27th August 2024):
Average Gas Price: 86.38 p/th
Average Electricity Price: £49.54/MWh
This week, the average gas price increased by 5.15%, rising from 82.15 p/th to 86.38 p/th. This increase was mainly driven by ongoing maintenance and the anticipation of future pipeline outages, which raised concerns about potential supply constraints. Cooler-than-normal temperatures also contributed to higher demand, pushing prices up. In contrast, the average electricity price decreased by 12.84%, falling from £56.83/MWh to £49.54/MWh. This decrease was due to fluctuating gas-for-power demand, influenced by varying wind power output and temperature changes. While some days saw higher electricity prices due to increased gas demand, overall, the stable contribution from renewable energy sources helped to bring electricity prices down.
Market Forecast for the Upcoming Week
Gas Market:
Supply Dynamics: With NCS maintenance set to begin on 29th August and the expected shutdown of Langeled from 2nd September, supply constraints may tighten. LNG imports are expected to remain steady, but the market may see some pressure due to these upcoming outages.
Demand Dynamics: The UK is forecasted to continue experiencing cooler-than-normal temperatures, which will likely sustain increased demand for gas, both for heating and power generation. Wind speeds are expected to remain low, further supporting gas-for-power demand.
Market Sentiment: Geopolitical risks, particularly in the Middle East and around the Sudzha pipeline, will continue to be a focal point. Any disruptions or escalations could lead to increased volatility in the market.
Power Market:
Demand Dynamics: Cooler temperatures and low wind speeds are expected to continue driving higher gas-for-power demand, which could keep power prices elevated. However, the start of NCS maintenance could affect gas availability for power generation.
Renewable Energy Contribution: Stable nuclear output and potential increases in renewable energy generation, depending on wind patterns, will influence power market dynamics.
Conclusion:
The gas market is expected to experience continued volatility, with potential price increases due to supply constraints and geopolitical risks. The power market may see fluctuations based on gas availability for power generation and renewable output. Stakeholders should remain vigilant, monitoring weather forecasts and geopolitical developments for any shifts that could impact supply and demand.
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: 19th August - 27th August 2024
Oil Market Overview
This past week, oil prices experienced notable fluctuations, influenced by concerns over China's economic slowdown, Middle Eastern geopolitical tensions, and signals from the U.S. Federal Reserve about potential interest rate cuts. Here’s a breakdown of the key movements and factors influencing the oil market:
19/08/2024:
Price Movement: Oil prices settled down nearly 2% as investors tempered expectations of demand growth from China. Brent crude fell by $1.36, or 1.7%, to settle at $79.68/barrel, while WTI crude fell by $1.51, or 1.9%, to $76.65/barrel.
20/08/2024:
Price Movement: Oil prices fell by more than $2 a barrel, with Brent crude settling at $77.66 and WTI at $74.37.
21/08/2024:
Price Movement: Oil prices dropped about 1%, with Brent futures settling at $77.20/barrel and WTI at $74.04/barrel.
22/08/2024:
Price Movement: Oil prices settled down by $1/barrel, with Brent crude at $76.05 and WTI at $71.93.
23/08/2024:
Price Movement: Oil prices rebounded more than 1%, with Brent crude rising to $77.22/barrel and WTI to $73.01/barrel.
27/08/2024:
Price Movement: Oil prices surged 3%, with Brent crude closing at $81.43/barrel and WTI at $77.42/barrel.
Key Influences on the Oil Market This Week:
Economic Concerns: Slowing economic growth in China weighed heavily on market sentiment, as indicators pointed to reduced demand for oil. The weakening Chinese economy, highlighted by slowdowns in industrial output and rising unemployment, remains a significant factor.
Geopolitical Tensions: Middle Eastern geopolitical dynamics continued to impact oil prices. While initial fears of conflict were eased by diplomatic efforts, concerns over potential retaliatory actions by Iran and disruptions in Libya's oil production kept the market on edge.
U.S. Economic Signals: Expectations of a U.S. interest rate cut influenced market movements, as lower rates could potentially stimulate economic activity and demand for oil. The revised employment data, indicating fewer jobs added, also contributed to market uncertainty.
Supply Dynamics: The unexpected shutdown of Libya’s oil fields, coupled with existing geopolitical tensions, highlighted the vulnerability of global oil supply. Additionally, the U.S. inventory drawdowns and fluctuating production levels in key regions played a role in price movements.
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: Continued monitoring of the situation in the Middle East will be crucial, with any escalation likely to drive prices higher. The potential for further disruptions in Libya’s oil production and possible retaliatory actions by Iran will remain key factors.
Economic Indicators: Key data from China and the U.S. will be closely watched. Signs of further economic slowdown in China could weigh on oil demand, while U.S. economic signals, particularly regarding interest rates, could influence market sentiment.
Supply Concerns: Any new developments regarding production in Libya or other oil-producing regions will be critical. Inventory levels and OPEC+ decisions will also play a role in shaping market dynamics.
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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