Energy Market Update - 17 December 2024
The European energy markets saw mixed movements, with upward trends in power prices offset by declining natural gas prices, driven by mild weather, strong renewable output, and stable LNG supply.
Spot natural gas prices declined across European hubs. The UK NBP spot price fell to 99.20 pence per therm, reflecting reduced demand due to higher-than-average temperatures and strong wind generation. Similarly, the TTF spot price decreased to €40.76/MWh, maintaining its downward trajectory amid stable Norwegian gas flows and LNG send-outs. However, Norwegian unplanned outages persisted at facilities like Kvitebjorn, slightly capping supply flexibility. EU gas storage remains robust at 77.91% capacity, supported by eight LNG cargoes scheduled to arrive in the UK by year-end.
In the power markets, UK spot prices rose to £62.09/MWh, supported by gains in European power curves. German spot power prices edged down to €52.03/MWh, while the Dutch market saw a rise to €68.51/MWh. Increased renewable generation continues to pressure near-term prices, with the UK’s wind output spiking by 12.8GW. However, constrained cross-border flows due to interconnector outages, including the 1GW Eleclink and the Britain-to-Netherlands link, pushed forward curve prices upward. For instance, German power prices climbed above €100/MWh as gas-linked power contracts gained strength.
Geopolitical developments add uncertainty to the market outlook. Ukraine confirmed it will not extend its Russian gas transit deal beyond 31 December, though it is open to transporting non-Russian gas. While an immediate disruption appears unlikely, the market remains cautious, with traders eyeing potential implications for 2025 supply routes. Furthermore, high temperatures in Northwest Europe continue to reduce demand, though forecasts indicate a return to seasonal norms later in the week.
Looking ahead, weather conditions and geopolitical factors will play pivotal roles in shaping market dynamics. While renewable output remains strong, reduced wind speeds and cooler temperatures could shift demand patterns. Stable LNG supply and storage levels are likely to temper any sharp price increases, barring unexpected disruptions in supply infrastructure.