UK Gas & Electricity Market Overview – November 2024

20/12/24

The UK’s gas and electricity markets experienced a 15-20% climb through November reaching a 12-month peak, as a cold weather pattern sat over Northwest Europe, bringing a two-week period of below average temperatures. Also, geopolitical hostilities in both the Middle East and Russia-Ukraine continue to add upward pressures on prices, bringing concerns for their impacts on future global supply chains.

Good Supply Factors

On average, UK’s gas system was over-supplied, as Norwegian gas plants overcame the compressor issues that plagued October and ramped up pipeline exports to 2024 highs. LNG cargos to European ports also continued to increase and 2024 is now anticipated to reach a 30-year high, as Asian demand fell, allowing the price premium to lean towards the west. Despite storms Bert and Conall hitting the UK at the end of the month to give wind generation a hefty boost, UK renewables had its lowest performing November in four years.

Winter Weather Affects EU Storage Levels

Weather was the main driver behind the European energy market’s recent bullishness. Cooler temperatures took hold and wind levels reduced, forcing gas demand to rise significantly in order to meet the sharp increase in heating requirements. Despite the improving export levels from both Norway and LNG from around the globe, this was not enough to stop Europe needing faster than usual withdraws from its gas storage facilities, which dropped by 10% to a YTD low not seen since 2021. This sharp drawdown has led to concerns that if temperatures remain well below seasonal averages, then EU stockpiles could deplete before spring arrives.

Geopolitical Issues Continue to Support Prices

Donald Trump’s US election win was deemed to be a positive result for the financial and energy markets. The self-labeled ‘Dealmaker’ has given pledges towards finding swift resolutions to international geopolitical issues and strong support of fossil fuels, with the ‘Drill-Baby-Drill’ slogan, which could help future global supply chains and energy demand. There was a step forward towards easing tensions in the Middle East as agreement for a 60-day cease-fire between Israel and Hezbollah, a militant group from Lebanon, was announced. Also, despite sanctions which aim to prevent Russian gas being bought by EU countries, some gas is still piped directly via a transit deal with Ukraine. However, this deal is due to expire at the end of the year and a renewal seems close to impossible. The expected drop in supply is adding support to prices.

Power Becomes Heavily Reliant On Gas

A drop in renewable energy generation saw November’s power mix become heavily reliant on gas, which was required to meet over a third of the UK’s demand. Stormy weather at the end of the month also caused disruption within the network, as high winds battered power lines and heavy rain brought flooding, leaving some rural areas isolated and without power for several days. The UK’s Emissions Trading Scheme (UKETS) saw little movement in its carbon price, ending the month slightly down at £36.80/tonne.