December 2023 Energy Market BriefTracked Contracts Exhibited Losses Over The Last Month

Throughout November, the majority of tracked contracts exhibited losses, in-line with the overall downward trend experienced across wholesale prices throughout 2023 to date, with the notable exceptions to this trend being experienced in the day-ahead contracts which recorded gains. The front-month contracts, characterised by shorter timeframes, saw the most significant month- on-month losses, while contracts extending along the forward curve
experienced a more subdued decline in prices.

Bearish market drivers remained consistent in November overall, acting to offset price rises, with notably reduced levels of maintenance across the Norwegian and UK Continental Shelf gas facilities throughout the month, acting to bolster security of supply.

As a result, on average, seasonal gas contracts from Summer 24 to Summer 26 were 2.2% lower in November when compared to the month previous. Winter 24 gas prices represented the highest average contract price in November at 132.39p/th – however, registering a 7.3% drop on the month prior.

Elsewhere, the UK received increased volumes of Liquified Natural Gas (LNG) into its deep-water ports – helping to satisfy the country’s demand ahead of the higher demand winter months, while acting as a ‘supply side balancer’ to the market. Currently EU gas storage levels have also remained strong, sitting at 96% full at the time of writing, and meeting the mandated target set by the EU to ensure gas storage sites are 90% full by 1 November – providing a bearish price signal for the UK wholesale gas market in turn.

Despite this, day-ahead gas prices experienced a slight increase from the month previous, up 0.7% to average 105.58p/th – finding support from periods of lower-temperatures acting to bolster domestic heating demand. Opposing this, the December 23 and January 24 front-month contracts were down 10.6% on average, with the contracts averaging 117.67p/th and 124.19p/th respectively.

Day-ahead power prices followed their gas counterpart higher in November – up 6.3% on average to sit at £94.68/MWh, finding bullish support from periods of decreased wind generation acting to tighten system margins and increase the use of more expensive plants. Despite the increase registered at the day-ahead level, all seasonal power contracts from summer 24 to winter 25 recorded losses, down by 7.1% on average.

The December 23 and January 24 front-month power contracts shared a similar price trend to that of their gas counterparts, dropping 12.6% on average to sit at £99.28/MWh and £114.29/MWh, respectively.

Brent crude oil experienced downward price movements across the month, falling by 7.9% to average $82.30/bl due to various bearish fundamentals. Price losses came from ongoing concerns around China’s weakening demand,  fuelling concerns over future global demand. China remains the largest importer of Brent crude globally and therefore, any material shift in consumption can alter the trajectory of prices.