UK Gas & Electricity Market Overview – September 2024

14/10/24

The UK energy market continued a bearish trend from August’s close and through September, with the maintenance season coming to an end and gas storage injections remaining strong. This was enough to counter the upward pressure concerns on future supply, as geopolitical tensions continue to exacerbate.

Favourable Supply Factors

Throughout September the UK’s gas system remained largely over-supplied, allowing demand to be met comfortably, and excess gas exported into Europe. This was enabled by strong flows of pipelined gas from the UK Continental Shelf (UKCS) and Norwegian imports increasing back to normal levels, as the infrastructure maintenance season approached its end. Additionally, after a lull in summer LNG shipments, four cargoes arrived from the USA to bolster the UK gas supply. However, this bout of arrivals may be short-lived, as the hurricane season threatens international shipping lanes across the Atlantic.

Favourable Demand Factors

On the demand side, despite cooler temperatures being forecasted to remain into October, only a couple of brief cool spells materialized for Northern Europe across September, limiting domestic heating requirement demand. Although significant rainfall during the middle of the month caused major disruption to areas of central Europe, this did not impact energy requirements. Additionally, it was also reported that weak European industrial demand reached as low as 19% below the 5-year average, helping to alleviate any rising demand pressures further. Therefore, as the supply and demand balance continue to tilt in an advantageous direction, both UK and EU gas storage levels continue to grow and reach well above the 5-year averages, with EU storage sitting at 94% full at the month’s close.

Geopolitical Issues Continue to Support Prices

Yet, despite these positive supply and demand factors, the energy markets remain sensitive to the ongoing geopolitical tensions and the threats that they pose to the wider world. This is in terms of both the growing conflicts and the supply chain disruption. September saw Israel increase hostilities with Hezbollah, by carrying out devastating explosions on their communication devices and conducting a series of airstrikes targeting Hezbollah infrastructure in Lebanon. This culminated in the assassination of Hezbollah leader, Hassan Nasrallah. It is these concerns, and the ongoing war in Ukraine/Russia, which is driving market volatility, as it reacts to each daily news update.

Balanced Power Generation Mix

September was a varied month for renewables, as periods of both high and low wind strength blended to provide approx. 30% of the UK’s power mix. Nuclear generation remained steady at 20% of the power mix, and consequently the largest proportion of the UK’s electricity was generated from burning gas. With no major disruption to the network and temperatures averaging slightly above seasonal norms, the UK’s electricity market maintained its connection to the gas market, also stabilizing over the period. The UK’s Emissions Trading Scheme (UKETS) also saw its carbon price maintain a bearish trend throughout September, dropping 14% to £36/tonne by the month’s close.