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Market Context
Prices moved up throughout March opposing the trend we have seen for the majority of 2024. A combination of intermittent supply, increasing Asian demand, and geopolitical factors in both the Middle East and Ukraine/Russian caused front season prices to rise around 10%.
- Production cuts at one of the largest gas producers in the US sparked an upward surge in the market.
- A ship was sunk off the cost of Yemen demonstrating increased tensions in the region.
- Attacks in Ukraine damaged gas infrastructure and terrorist attacks in Moscow created further tension.
- North Sea gas flows were impacted by a combination of maintenance and testing.
- Low LNG arrivals during the month as Freeport LNG in the US continues to experience low output.
- Storage ended winter period at c.57% which is higher than last years and significantly higher than the 5-year average of around 40%.
In other news
In other news, the prime minister has announced that the UK needs to build new, gas-fired power stations to ensure the country’s energy security. The new stations would replace existing plants, many of which are aging and will soon be retired. The announcement did not include measures for climate change-limiting carbon capture which means that they could threaten a legally binding commitment to cut carbon emissions to net zero by 2050, critics say.
Seasonal Prices
Price Table
Prices across the curve generally rose throughout March as a combination of geopolitical and fundamental drivers pushed prices up from the low levels witnessed in February.
Month End Prices
Spot Prices
| Fuel | Mar-24 (p/kWh) | Feb-24 (p/kWh) | Month-on-Month Difference |
|---|---|---|---|
| Gas (NBP) | 2.34 | 2.15 | 9% |
| Power (UK Baseload) | 5.45 | 6.33 | -14% |
Front Months
| Fuel | Mar-24 (p/kWh) | Feb-24 (p/kWh) | Month-on-Month Difference |
|---|---|---|---|
| Gas (NBP) | 2.36 | 2.13 | 16% |
| Power (UK Baseload) | 6.16 | 5.95 | 3% |
Front Season
| Fuel | Mar-24 (p/kWh) | Feb-24 (p/kWh) | Month-on-Month Difference |
|---|---|---|---|
| Gas (NBP) | 2.37 | 2.12 | 12% |
| Power (UK Baseload) | 6.30 | 5.91 | 6% |
Annual Price (Oct-23)
| Fuel | Mar-24 (p/kWh) | Feb-24 (p/kWh) | Month-on-Month Difference |
|---|---|---|---|
| Gas (NBP) | 2.70 | 2.49 | 8% |
| Power (UK Baseload) | 7.10 | 6.61 | 7% |
Historical Comparison
| Fuel | 2019 Average Front Season Price (p/kWh) | % Increase to Mar-24 |
|---|---|---|
| Gas (NBP) | 1.64 | 45% |
| Power (UK Baseload) | 5.10 | 23% |
Outlook
If Geopolitical events generally continue to take a backseat, then the outlook is skewed towards bearish with the strong fundamental outlook set to continue through the summer period. The small bounce prices witnessed through March may be an indication of markets finding a comfortable level post the energy crisis.
Bearish Signals
- Record high storage stocks for the time of year.
- Lighter Norwegian maintenance schedule in the coming months.
- Demand destruction across heating demand and industrial sectors continue in line with EU commissions recommendations.
Bullish Signals
- Continuing geopolitical risk of regional escalation in Middle East and Red Sea.
- LNG supply expected to be lower in the coming months.
- Expiry of Russian transit contract via Ukraine is impending with uncertainty around future transit.
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