January 2024 Energy Market BriefTracked Contracts Exhibited Losses Over The Last Month

Throughout December, all tracked power and gas contracts exhibited losses, in-line with the overall downward trend experienced across wholesale prices throughout much of 2023. Since October, we have observed the steady decline of UK power and gas prices.

Bearish market drivers remained consistent in December, acting to suppress price rises. Particularly from an NBP gas point of view, low levels of gas plant/field maintenance across both the UK Continental Shelf and Norwegian Continental Shelf remained minimal – allowing a healthy volume of gas to reach the UK.

Similarly, we also recognise that December remained a relatively mild month – particularly by comparison to typical seasonal averages – meaning national gas demand for heating and also wider industry usage was lower than can be expected for the time of year. Elsewhere, EU gas storage levels as of 3 January sit at >86% fullness. This is a buoyant starting position as we move into early 2024 and alleviates a level of concern over gas supply as we now sit within the typically coldest period of the calendar year.

As a result, on average, seasonal gas contracts from Summer 24 to Summer 26 were 15.8% lower in December when compared to the month previous. Winter 24 gas prices represented the highest average contract price in December at 107.69p/th – though still registered a 17.7% drop on the month prior.

Similarly, day-ahead gas prices experienced a marked decline from the month previous, down 19.7% to average 85.31p/th – driven in part by milder weather, lower demand, and strong levels of renewable generation. Front month contracts followed this trend, with January 24 and February 24 down 24.8% on average, with the contracts averaging 91.77p/th and 93.15p/th, respectively.

Day-ahead power prices followed their gas counterpart lower in December – down 26.3% on average to sit at £73.77/MWh, with drivers of the evident downturn in price stemming from mild weather, higher renewable output and the downward adjustments of gas prices sending a bearish signal for power to follow more generally.

Much like gas, all seasonal power contracts observed losses in the month of December. From Summer 24 to Winter 25, these contracts fell by an average of 13.9% – with Summer 24 the largest of the recorded losses at 17.6%.

The January 24 and February 24 front-month power contracts shared a similar price trend to that of their gas counterparts, dropping 22.0% on average to sit at £87.59/MWh and £89.84/MWh, respectively.

Brent crude oil experienced downward price movements across the month, falling by 5.4% to average $77.84/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. However, any sustained losses have been pegged back by concerns over shipping delays through the Suez Canal as reports emerge of Houthi rebels operating there as well as in the Red Sea.

Across the EU and UK carbon markets, a similar downward trend was registered across December, with the EU Emissions Trading scheme (ETS) carbon price falling 5.8% lower to €72.09/t. Similarly, the UK ETS registered a notable month-on-month loss of 9.0% – to average £38.06/t in December which we can attribute, at least in part, to the recent mild weather – easing demand for gas and other fossil fuel fired emitters in the generation mix