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
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Market Insight

Datasets reproduced in partnership with

Tues, 19th Nov ’24

GAS

Notably, Summer-25 has been at a premium versus Winter-25 since 8th Nov, and remains so – reflective surely of wintry dynamics lifting the front of the curve to inflated levels i.e., not a good time to be hedging front gas seasons (see chart below).
Prices are marginally down this morning versus yesterday’s close off the back of a long system (supply outstripping demand forecast) – this despite the demand forecast being above seasonal norms due to the low temperatures which are well below seasonal norms.
We’ve also seen some bullishness (tempered by high storage) over the last few days fuelled by the market’s reaction to the ongoing OMV saga (despite recent reports of Gazprom’s decision to stop shipments to Austria’s OMV, Russia’s flows into Europe are unchanged at the time of writing).
By way of a parting gesture, Biden has lifted the ban on Ukraine attacking Russia with US weapons.
That Ukraine now has access to more firepower only serves to increase the jitters that Russian gas transit infrastructure may be at risk.
In other news, a new supply route that would provide up to 35 billion cubic meters (bcm) per year via Kazakhstan is being explored by China and Russia.
This is in addition to the ongoing negotiations over the Power of Siberia 2 pipeline, which will pass via Mongolia – both projects are part of Russia’s devout wish to diversify its exports to China.
It’s worth noting that the less-than-urgent nature of the discussions is likely being influenced by China’s simmering economic downturn (meaning additional supply is likley to be unnecessary until beyond 2030, if at all).
UK prices will likely remain at a premium versus Europe’s as the winter progresses – otherwise, we’ll be left high and dry where LNG arrivals are concerned!
This premium is always 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.
Monthly Day-Ahead averages so far this month are on target to achieve 107.8p/therm (or approx. 3.678p/kwh excluding non-gas).

ELECTRICITY & CARBON

Looking to the continent, European Carbon (EUAs) continued to edge higher yesterday before closing at €69.51/tn.
The Dec ’24 EUA benchmark remains above short-term moving averages, tentatively suggesting an upward trend.
The rise of European gas prices has also been supportive of EUA increases so far this week – its fossil-fuel cousin, coal, is also holding its ground (adding further bullish support).
It’s worth noting that coal plants are increasingly more competitive than gas plants for near-term delivery.
With wintry wind outputs poor (given cold, still wintry conditions), we may see increased emissions from the power sector (gas-for-power burn), adding buy pressure for EUAs (Mandatory Carbon Allowances).
A strong cold spell is forecast with UK temperatures plunging 5°C below normal (Wednesday-Friday) and France reaching 4°C below normal by Saturday.
A rapid warming is forecast to follow, pushing temperatures 3°C above normal in France by Sunday-Monday.
Solar output remains subdued due to snowfalls and fog, while hydro generation should benefit from weekend snowmelt, before drier conditions set in next week under high pressure influence.
UKAs (UK Mandatory Carbon Allowances) have mirrored EUAs’ sideways price action of late, but as of this week, we’re seeing increased divergence.
Whilst UKAs have still yet to retest the lows of 8th Oct (currently sitting at £37.94/tn on the mid-price -please see chart below), prices still look heavy with the RSI (relative strength indicator) sitting at mid-range reflecting an increasingly tight range/consolidation pattern.
The UK’s electricity generation mix is bullish in nature today with renewables contributing 28%, thermal at 41% (gas and coal) and low carbon at 20% (nuclear and imports).
Monthly Day-Ahead averages so far this month are on target to achieve £101.129/mwh (or 10.11p/kwh excluding non-energy).