Februaury 2024 Energy Market BriefConsistent Losses across all tracked contracts

In January, downward sentiment was observed across all tracked NBP gas contracts. Losses across these contracts were relatively consistent, both in the shorter-term as well as further out on the forward curve. However, we do highlight those seasonal contracts from Winter 24 into Summer 26 registered less pronounced price reductions compared with near-term contracts closer to their point of delivery. On average, seasonal gas contracts from Summer 24 to Summer 26 were 14.0% lower in January compared with the previous month, with the most significant average price losses concentrated across Summer 24 and Winter 24 (down 18.0% and 15.4% respectively).

More broadly, January registered continued strong levels of wind generation. Although average wind generation levels were down 11% on the record-breaking levels seen in December, wind levels remained high enough to notably contribute to the overall generation mix, and subsequently place less demand on more expensive plant like gas. Likewise, we continue to observe low outage levels throughout select plant and gas fields across the Norwegian Continental Shelf, increasing flows into GB and bolstering supply on the gas network as a result.

To date, EU gas storage levels have remained strong, softening gas prices on the continent and providing a bearish price signal for the UK market to follow. However, stronger losses were limited across near-term gas contracts following periods of higher demand on the gas network, particularly in the middle of the month where temperatures were notably below seasonal norms. However, we saw day-ahead gas fall across the month, down 13.0% to average 74.25p/th. Similarly, front-month contracts were down 20.1% on average from December, with February 24 averaging 74.34p/th and March 24 at 73.46p/th.

Day-ahead power prices opposed their gas counterpart and registered a month-on-month gain, the only tracked gas and power contract to exhibit an increase, up 1.4% on average to sit at £74.70/MWh. This increase was likely the result of lower wind generation at the beginning of the month, after the high levels experienced in the latter half of December increasing the demand for more expensive forms of power generation.

Longer term power contracts exhibited losses, derived from increased supply security over the remaining winter period, following strong French nuclear generation and bolstered interconnector flows as the introduction of the Viking Link interconnector increases supply diversity to the UK. Front-month power contracts, February 24 and March 24, subsequently fell 18.6% on average to sit at £74.00/MWh and £69.47/MWh, respectively. Likewise, seasonal power prices decreased on average by 12.8% month-on-month.

Brent crude price rose 1.4% higher to $78.95/bl on average and extended those gains as the month matured – with prices at the end of January 5% higher than the month’s start. A primary driver for higher prices in the month came after EIA data showed that US crude stockpiles fell more than expected and news that Chinese central banks will undertake stimulus measures to boost the Chinese economy, and oil demand by extension. Moreover, we see the commodity continue to be impacted by the war in the Middle East, and changes to global shipping routes in the wake of attacks on vessels in the Red Sea.