UK Gas & Power: Mixed Signals Amidst Ample Storage and Rising Wind (July 2nd - 8th)

Head of Sales Trading, Jean-Philippe Marty, reports on energy market activity, covering the period 2nd July – 8th July 2024. On our end-of-day pricing tool, The Source, we published an in-week high of £89.80/MWh for the Winter-24 seasonal power price on 2nd July. In this blog, JP shares the market news and updates from the last week. 

Last week kicked off with a muted start for UK and European gas prices. While storage levels remained stable and cooler temperatures didn't trigger significant cooling demand, a potential profit-taking motive may have caused an afternoon recovery. Power prices followed suit, with the most active trading concentrated on Q4-24 and Q1-25 contracts and their associated spreads.

Wednesday brought a decline in prices. A long UK gas system in the morning, coupled with rising wind generation, exerted downward pressure. The N2EX day-ahead auction cleared at a significantly lower price compared to the previous day, reflecting the impact of wind on power demand. Norwegian gas flows increased, and LNG deliveries remained unchanged. The most traded UK power contracts for the day were August-24 and Winter-24.

Thursday saw a modest uptick in UK and European gas prices, primarily driven by technical signals. Despite bearish fundamentals like near-full storage projections for next month and healthy Norwegian flows, technical factors influenced prices. Power prices also rose slightly, but gains were limited by a decline in carbon prices. The N2EX day-ahead baseload price returned to "normal" levels after the very low clearing price seen on Wednesday due to high wind generation forecasts.

Friday witnessed a brief spike for Winter-24 NBP prices, followed by a rapid decline before settling around the 98 pence per therm mark. Analysts considered the market balanced, with stable and rising Norwegian flows sufficient to cover increased gas for power demand. While long in the morning, the UK gas system moved towards a balanced position by the end of the day. August and Q4-24 contracts saw the most trading activity in the UK power market, with limited interest in seasonal contracts.

This week culminated with European gas prices finding initial support on Monday due to concerns that Hurricane Beryl might disrupt US LNG exports. UK power prices mirrored the decline in gas and carbon markets. The N2EX day-ahead baseload price cleared significantly lower in anticipation of higher wind generation forecast for Tuesday.