November 2023 Energy Market BriefMixed Market Directions

During October, most of the monitored GB wholesale gas contracts recorded gains for the month. However, contracts further out on the curve, notably across seasonal gas contracts, were the exceptions to this trend. The contracts with shorter timeframes, like the front-months, experienced the most significant month-on-month gains, while we noticed a somewhat softer price decline for contracts further along the forward curve. Likewise, gas experienced a more bullish month than power – the result of continued gas supply uncertainty.

An elevated degree of price risk was baked into contracts throughout October, as market concerns surrounding energy infrastructure grew following damage to the BalticConnector pipeline, the growing Israel-Hamas conflict, and the potential for industrial strike action across Australian LNG terminals in the first half of the month. This is particularly relevant as Western nations are more reliant on the global market for the procurement of gas following the Russian invasion of Ukraine.

Despite this, on average, seasonal gas contracts from summer 24 to summer 26 were 1.2% lower in October compared with the previous month. Winter 24 gas prices represented the highest average contract price in October at 142.80p/th.

During the middle of the month, the culmination of various geopolitical events acted to increase energy security concerns. Moreover, a period of notably below-average temperatures across the UK acted to bolster gas demand, in tandem with reduced wind generation tightening system margins. This resulted in a week-on-week increase to day-ahead gas of 97.1%, reaching 135.00p/th on 13 October – the highest since February 2023. Stronger price gains across October were limited by strong EU gas storage levels, which continue to remain a prominent price driver ahead of the winter period.

Day-ahead gas prices rose in September, up 14.9% to average 104.83p/th. Likewise, front-month contracts were up 4.9% on average from September, with November 23 averaging 116.98p/th and December 23 at 130.95p/th.

Day-ahead power prices followed their gas counterpart higher in October – up 7.2% on average to sit at £89.03/MWh. Similarly, day-ahead power reached a seven-month high on 13 October at £130.00/MWh, due to the strong bullish adjustment recorded by its gas counterpart, and reduced wind generation in tandem. Most seasonal power contracts recorded gains, however overall seasonal power contracts rose by only 0.1% on average from summer 24 to winter 25 – weighed by a 5.8% drop across the winter 25 contract.

Front-month power contracts (November and December 23) shared the price direction of their gas counterparts, although to a much lesser extent, rising 0.2% on average to sit at £104.39/MWh and £115.14/MWh, respectively.

The price of Brent crude remained volatile across October, falling by 3.1% to 89.39/bl, with conflicting market fundamentals influencing the price. Bearishness was found through increased oil output from Nigeria and Turkey, with the latter restarting operations on the Iraq-Turkiye pipeline, and the US agreeing to ease sanctions on Venezuela’s oil industry. However, the ongoing Israel-Hamas conflict has the potential to impact the oil producing regions of the Middle East – providing a bullish pricing sentiment into the future.

Elsewhere, EU and UK carbon markets registered opposing movements. The EU ETS fell 1.7% lower to €81.64/t whereas the UK ETS rose 10.8% to £43.60/t.