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

Datasets reproduced in partnership with

Wed, 8th Jan ’25

GAS

Arguably, front-month UK gas delivery has been observing the same rising trend channel since Feb ’24 (please see chart below).
As you’d expect, volatility has been high over the holiday period (thin liquidity invariably means high volatility as any buy or sell orders move the market disproportionately) – though with the return of volume/liquidity, the last few days have seen prices dropping-off to reflect improved value with momentum indicators heralding the bearish move with clear divergence at the turn of the year (RSI as detailed in the chart below).
As per our report on New Year’s Eve, the Ukraine/Russia transit deal is no more, and markets are still getting to grips with a revised supply outlook – though on the face of it, the widely anticipated outcome of failed negotiations was already “baked-in” to prices in the run-up to the announcement last week.
Both near- and far-term prices are down again this morning, continuing yesterday’s closing session.
Nonetheless, conditions are cold and still – meaning an increased reliance on gas-for-power burn and pressure on storage withdrawals, which ordinarily would drive the market higher.
The fact the market is falling is a reflection of how overcooked the prices were over the Christmas break (as per our prediction).
Down the curve, the outlook is more favourable with bearish key drivers for the coming weeks – higher temperatures and rising LNG arrivals.
European gas storage is at 69% fullness, which is a little on the low side and reflects storage withdrawal in the face of low wind generation and colder temperatures.
Europe’s reliance on LNG arrivals has gone up a notch with the end of the Ukraine/Russia transit deal, so it makes sense that arrivals are set to increase.
All eyes will be on Asia’s demand for LNG going forward as Russia continues to engineer increased competition for fossil fuels between East and West.
China looks to have taken delivery of less LNG M-o-M again for Dec ’24, with cargoes following the money to Europe.
Geopolitically, Trump looks determined to further reduce China’s output – we’ll be keeping a close on Asia’s LNG inventories over the coming months.
Back in the UK, Monthly Day-Ahead averages for Dec-24 achieved 111.389p/therm (or 3.801p/kwh).
Monthly Day-Ahead averages for this month so far are inflated but falling, 121.871p/therm (or approx. 4.158p/kwh excluding non-gas).

ELECTRICITY & CARBON

Slightly inflated electricity prices reflect the time of year – driven in the main by (normally) high seasonal demand amid low temperatures and poor wind outputs.
Down the curve, prices are mirroring sliding gas markets.
On the Carbon markets, UKAs are again at a significant discount versus EUAs – reflecting less scarcity of credits (with free allowances not scheduled to fall in the UK until 2027).
As we predicted, the illiquid holiday period UKA rally has lost steam, with bearish price-action now breaking below internal trend channels on its way to likely retest the 18th Dec ’24 lows (please see chart below).
Today’s UK’s electricity generation mix is bullish (and price supportive) in nature with renewables contributing 17%, thermal at 50% (gas and coal) and low carbon at 19% (nuclear and imports).
Monthly Day-Ahead averages for Dec-24 achieved £90.955/mwh (or 9.1p/kwh excluding non-energy).
Monthly Day-Ahead averages for this month so far reflect poor renewables outputs, £102.112/mwh (or 10.21p/kwh excluding non-energy).