July 2024 Energy Market BriefNo Change in Market Conditions

June saw the continuation of increased wholesale price movements across both tracked gas and power contracts, similar to the movements seen in April and May – with below-average temperatures for the majority of the month keeping a steady level of heating demand on the system, which would typically be lower at this time of the year.

Across the month, we saw day-ahead gas register a 6.8% gain month-on-month to average 81.95p/th. Similarly, front-month contracts registered price increases, up on average by 5.1% when compared to May, with July 24 seeing a 5.9% rise to 81.25p/th, and August 24 growing 4.3% to 82.65 p/th. Gains were supported by restricted gas supply from the Norwegian and UK Continental Shelves acting to tighten system conditions, and as result of continued outages across several large Norwegian gas fields, shorter-dated gas contracts registered gains.

Moreover, prices found support from an outage across the Wheatstone LNG processing facility in Australia, which acted to impact global LNG supply levels and lead to increased Asian cargo competition. Longer-term contracts found support from the increased Asian cargo competition as competition for the procurement of LNG grows – however this remains subdued by strong gas storage stocks across Europe.

Seasonal gas contracts from Winter 24 to Winter 26 were, on average 2.5% higher in June when compared to May – despite some risk removed from these contracts as European gas storage levels remain well stocked. In continuation, more notable price gains across front-month contracts were offset by the notable stockpiles of European gas, which currently sit at 76% at the time of writing – boosting gas supply amid reduced Norwegian output. This trend is anticipated to continue as the summer months progress and temperatures remain elevated – acting to lower gas-for-heating demand.

Rising front-month contracts in gas provided a bullish price direction for power to follow – with day-ahead power prices registering a 5.0% gain month-on-month to average £75.58/MWh. Additionally, these gains can also be attributed to tightened system margins following decreased gas supply, an outage across the Hartlepool 1 nuclear reactor, and below-average temperatures.

Similarly, both front-month power contracts registered gains, as July 24 rose 4.3% to £74.32/MWh, and August 24 grew 3.7% to £73.78/MWh. Moreover, much like its gas counterpart, seasonal power prices saw a collective upwards movement – rising 1.6% on average. Winter 24 traded as the premium market, seeing a 3.0% increase to average £88.83/MWh.

Brent crude oil continued to fall month-on-month, averaging $82.44/bl – down 0.8%. This came following higher US inflation data, leading to weaker demand expected as economic growth remains impacted, and a likely delay to a US interest rate cut until December. However, these losses were limited by OPEC+ announcements that supply would be cut by 2.2mn barrels per day until September, tightening global markets – in tandem with escalation to conflict across Europe and the Middle East.

LNG prices continued with the trend seen last month, and recorded an 8.8% gain, averaging 98.63p/th, as competition between Europe and Asia for the procurement of LNG has been reignited as Asian buyers return to the market, prompted by heatwave conditions acting to bolster gas-for-power requirements, in tandem with Europe needing to ensure sufficient cargoes are arriving to continue storage injections.