Name: ICD Energy Managers
Address: Q16, Quorum Business Park, Benton Lane,, Newcastle Upon Tyne, Tyne and Wear, NE12 8BX, United Kingdom
Telephone: 0191 215 5456
Price range: £££

Market Insight

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Thurs, 7th Nov ’24

GAS

Prompt (near-term delivery) prices are bunched at near-parity with the onset of Winter-24 conditions – in contrast to Summer-24 conditions when Day/Month-Ahead were at significant discounts to Quarter/Season/Year-Ahead (see chart below).
This of course reflects the tightness of near-term pricing whilst in the front quarter of the winter season (traditionally not a good time to be hedging Seasonal Forwards).
Prices are unchanged this morning – it’s sideways movement.
Prices dropped off yesterday in response to Trump’s election win.
Though oil is notably back up today amid fears of Hurricane Rafael’s anticipated disruption to production across the Gulf of Mexico.
Weather forecasts suggest demand is set to increase with colder temperatures (heating) and low wind outputs (gas-for-power burn).
On the supply side, Norwegian flows to the UK are in good shape, whilst LNG arrivals are on the up, with 5 vessels expected to degasify at UK shores before month-end (reflecting our higher prices being more attractive to cargos which otherwise would likely be headed to Asia).
As a buffer to bullish wintry momentum, European storage fullness is holding steady at 95% (on a par with the 5-year average).
Despite Chinese fears of tariffs/protectionism/anti-globalisation sentiment following the return of Donald Trump to the White House (beginning 2oth Jan ’25), consensus amongst traders is that resulting geopolitical tensions are likely to be subdued over the coming year as demand will be low due to sluggish Chinese industrial activity against a backdrop of plentiful supplies.
As we head deeper into Winter-24, LNG imports into Asia are in fact falling, whilst Europe’s are on the rise.
As usual, the UK’s gas will likely remain at a premium versus Europe’s as the winter progresses – otherwise, we’ll not attract the cargos.
The premium is exacerbated by structural problems in the UK’s gas system resulting in high transmission costs and, of course, a lack of storage compared to Europe – meaning the UK needs to offer a much higher price to secure supply.
As a rule of thumb, UK gas prices ordinarily trade at a discount to European prices during the summer, but remain at a premium in winter when the infrastructure creaks.
Monthly Day-Ahead averages so far this month are on target to achieve 99.967p/therm (or approx. 3.411p/kwh excluding non-gas).

ELECTRICITY & CARBON

The front 3 UK electricity Seasonal Forwards (Summer-25/Winter-25/Summer-26) this November are markedly lower versus 1-year/2-years ago (see chart below).
Looking to the continent, EUAs (European mandatory Carbon Allowances) were down yesterday mirroring gas prices.
The move was driven by the US elections results, which saw a widespread sell-off of European assets across the board (equities, energy etc).
Conversely, the COT (Commitment of Traders Report) this week has proven supportive, as speculators slashed their net short position by roughly 10% for the week.
On the European weather-side, the outlook remains mostly mild until the weekend (+2/3°C above normals), followed by lower temperatures next week.
Wind generation will be modest in the coming days before a still weekend, though next week shows promise for higher generation, particularly in the UK.
Solar power generation is expected to be moderate but will face limitations from morning fog.
The week ahead will stay largely dry across WE (Central Western Europe), except for some rain in Eastern Spain, so adding more pressure on run-of-river generation.
UKAs (UK Carbon Allowances) have yet to retest the lows of 8th Oct – currently sitting at £38.10 on the mid-price.
Our electricity generation mix is bullish in nature today with renewables contributing 24%, thermal at 48% (gas and coal) and low carbon at 17% (nuclear and imports).
Monthly Day-Ahead averages so far this month are on target to achieve £102.092/mwh (or 10.21p/kwh excluding non-energy)