March 2024 Energy Market BriefSustained Downward Trends Were Observed

In February, sustained downward trends were observed, continuing the bearish wholesale pricing movements experienced throughout 2024 to date.

Seasonal gas contracts from summer 24 to winter 26 were, on average, 10.1% lower in February when compared to the previous month which continues the previous six months of consecutive average losses.

The first two months of 2024 have continued the trend of decreasing wholesale prices – a consequence arising largely from the mild winter observed across the UK and north-west Europe, in which gas storage levels were therefore kept well stocked in what traditionally represents the highest withdrawal period of the calendar year.

Furthermore, the temperature profile across the spring 2024 period has been warmer than usual – easing gas demand and demand on other fossil-fuelled emitters which would otherwise be called upon to help manage system constraints during periods of high system demand (cold spells).

Across the month, we saw the day-ahead gas price fall 14.4% to average 63.54p/th, and we saw day-ahead gas prices drop to the lowest levels seen since November 2022 on 19 February at 56.70p/th.

Likewise, front-month contracts were down 14.5% on average when compared to January, with March 24 seeing a 13.4% drop and April 24 recording a 15.6% drop to 63.60p/th and 63.47p/th respectively.

Following the bearish sentiment set by its gas counterpart, on which it is heavily influenced by, day-ahead power prices averaged £60.83/MWh across February, down 18.2% when compared to the prices observed last month. This loss can be attributed to the lowering of gas prices across the UK, coupled with easing demand levels.

It is important to acknowledge that losses were limited by a drop in wind generation levels when compared to January values. A similar downward trend was recorded across GB wholesale power prices, with front-month contracts decreasing as March 24 dropped 12.9% to £60.38/MWh, and April 24 fell 13.6% to £59.37MWh.

Likewise, seasonal power prices saw a decrease, falling 12.0% on average – with winter 25 the premium market, standing at £75.00MWh, but down 11.9% when compared to January.

Brent crude prices rose 3.0% to $81.43/bl, with prices peaking in the latter half of the month at $83.25/bl. This came following further attacks on ships in the Red Sea, heightening fears of supply disruption in the region in tandem with a weaker US dollar. Likewise, further upward sentiment came from indications of stronger oil
demand across China throughout 2024.

Looking further ahead, Brent crude oil is set to experience a bullish year ahead as forecasts project growth in oil demand, pushing the price of the commodity up as supply levels remain restricted following OPEC+ supply cuts anticipated to remain in place across the first quarter of 2024.