April 2024 Energy Market BriefTurbulent times as market finds direction

In March, we saw all tracked gas and power contracts register gains, when compared to February, despite the first two months of 2024 showcasing relatively consistent losses in wholesale energy costs.

Seasonal gas contracts from Summer 24 to Summer 26 were, on average, 3.2% higher in March when compared to the previous month, reversing the six previous months of consecutive average losses.

Whilst there has been no evidence of a radical shift in the fundamentals underpinning the current wholesale pricing environment here in GB, we have observed the introduction of some more bullish market dynamics that underpin the highlighted wholesale price rises across the month. Price rises in gas were relatively consistent across the full forward curve, inclusive of near-term contracts closer to delivery.

Across the month, we saw the day-ahead gas price rise 7.6% to average 68.33p/th. Likewise, front-month contracts were up 6.3% on average when compared to February, with April 24 seeing a 7.0% rise and May 24 recording a 5.7% rise to 67.90p/th and 67.17p/th respectively.

Much of the upward price adjustment in price observed over March stemmed from supply dynamics. Specific to gas, we continued to see the reduction in flows from primary gas supply sources such as Norway and the UK Continental Shelf (UKCS), amid maintenance work-scopes or other unspecified technical downtime, resulting in reduced operational capability and therefore available volume able to reach the National Transmission System (NTS).

Secondary influences stem from reduced power generation available. We observed a steep drop-off in daily wind generation averages in March compared with February, down 27% month-on-month – the net result being a higher reliance on more expensive forms of power generation to supplement that deficit, such as gas-fired assets or gas peaking plant.

Elsewhere, some sentiment based increase to the GB gas market came from buoyant Dutch TTF prices, sending an upward price signal for many other western gas markets to follow.

A similar upward trend was recorded across GB wholesale power prices, with day-ahead power prices up 7.4% to £65.30/MWh. Front-month baseload power contracts observed similar price rises, climbing 4.3% on average. April 24 saw a 4.7% rise to £62.19/MWh and May 24 rose 3.9% to £60.44/MWh. Much of the near-term prices rises for power contracts came from the reduced wind generation seen on the grid, tightening system margins.

Similarly, non-planned maintenance works continue among select nuclear generating plants in the five-strong operational nuclear fleet here in GB. Heysham 1 (reactor 2) and Hartlepool (reactor 2) remained offline for the majority of the month.

At the time of writing, EDF has set return statuses of 30 March 2024 for Heysham 1 and 28 March 2024 for Hartlepool. The unexpected downtime of these particular reactors squeezed available power capacity to the network across the month of March.

Much like the seasonal gas forward curve, power contracts also saw prices climb. From Summer 24 to Winter 25, these contracts saw an average rise of 2.9%. Winter 25 was the premium priced seasonal contract across
March, at £75.45/MWh.

Wider international commodity markets followed the upward trend of domestic gas and power prices. Brent crude oil rose 3.8% to average $84.50/bl. Price support continues to come from OPEC+ supply cuts and the on-going conflict across the middle-east, potentially disrupting global crude oil supply and in particular the West.

Carbon prices across both the EU and UK Emissions Trading System (ETS) saw price rises. EU ETS prices climbed 3.6% to average €59.58/t and the UK ETS lifted 3.9% to £36.56/t