Nov24 Energy Market BriefTrending Markets Drift Higher

Nov24 Energy Market Brief – In October, we observed near-term pricing (particularly on the day-ahead contract) return to bullish growth, after primarily recording losses in September.

A higher level of price risk remains baked into longer-dated contracts as we approach the beginning of the winter season without the significant and equally historic contribution of Russian natural gas, and the end of the Ukraine Transit Deal in December, in which Europe may lose approximately 5% of its commercial gas supply.

As a result, on average, seasonal gas contracts from summer 25 to summer 27 were 4.3% higher in October compared with the previous month. Winter 25 gas prices represented the highest average contract price in October at 101.79p/th.

Competing market fundamentals were reflected in price movements in October. Bullish price movements at the day-ahead level were seen predominantly in the latter half of the month.

We observed tight system margins across the final week in October where wind outturn was notably low, placing higher reliance on more expensive gas-fired generation plant called upon to meet demand, with prices rising to 108.50p/th on 25 October, the highest level seen since December 2023.

Prices also saw support stemming from the ongoing conflict in the Middle East, and maintenance across the UK and Norwegian Continental Shelves, in tandem with lower temperatures increasing gas-for-heating demand across GB.

However, bearish market drivers remained consistent in October overall, capping price rises, with a strong influx of LNG continuing to reach UK landing terminals and supporting the immediate supply/demand picture, and strong EU gas storage stocks limiting concerns surrounding winter gas supply.

Consequently, we saw day-ahead gas rise, up 14.3% to average 98.61p/th. Front-month contracts were also up 6.9% on average from September, with November 24 averaging 100.97p/th and December 24 at 103.04p/th.

Day-ahead power prices followed their gas counterpart higher – up 11.8% on average to sit at £87.25/MWh, reaching the highest level seen since December 2023 at £107.66/MWh on 29 October. Elsewhere, seasonal power prices were up 1.1% on average from summer 25 to winter 26.

The strong upward momentum on near-term domestic gas prices set a bullish direction for power prices to follow.

Much like gas, the tail-end of October represented elevated prices to the monthly average.

Similarly, on 14 October, the National Energy System Operator (NESO) announced the cancellation of the Capacity Market Notice.

Triggered by the margin being below the threshold set out in the Capacity Market Rules, the Notice was originally posted at 12.03pm on Monday 14 October – to be active from 4:30pm on the same day.

The Notice was then cancelled at 2.05pm on Monday 14 October.

Brent crude prices rose 3.7% to $75.60/bl, opposing the notable bearish movements seen in the month previous, due to supply concerns stemming from Hurricane Milton, with this bullish movement being strengthened by the conflict in the Middle East.

Goldman Sachs stated that oil prices are expected to average $76.00/bl in 2025 due to sufficient global spare capacity.

It was noted though that geopolitical risks from the Middle East conflict could lead to sudden increases in oil prices at any time.

Elsewhere, carbon markets in both the UK and Europe registered downwards movements. The EU ETS fell 2.5% to €63.86/t and the UK ETS fell 5.4% to £38.29/t.