Market Report October 2024

Gas and power markets have been less volatile compared to last month, as Oil and LNG supply from the Middle East have remained steady, temperatures and wind generation levels have been above seasonal norms, and European storage levels are high. However, geopolitical concerns and colder than average forecasts for late October could lead to a short-term increase in prices. The longer-term outlook, assuming no interruption in exports from Qatar, is still bearish as LNG supply is expected to increase significantly in 2025. Despite the ongoing unplanned outages affecting Norwegian gas supply, the level of storage in European facilities has increased by 0.4% week-on-week (currently at 95%) and positions the EU well ahead of its 90% target by November 1st, thanks to mild weather and steady LNG imports across Europe.

Temperatures across Europe are expected to remain well above seasonal values for another few weeks, however, forecasts point to a colder than average period starting from the start of November, with low wind generation levels which will likely cause wholesale prices to spike, and long-term weather forecasts indicate the UK may be in for a cold and wet Winter potentially increasing the demand for gas-for-power demand to support the National Grid, and increasing gas prices as a result.

With the US election fast approaching, the outcome of who is named the next president could also affect the wholesale markets, with both candidates having vastly different perceptions on how to resolve the ongoing geopolitical issues.

With the Winter season now upon us, should you have any imminent energy renewals due, it is likely beneficial to take a position now before the traditional increase in wholesale prices as we mover through the season.

In other news

Electricity bills for small industrial consumers are set to rise £200k by 2026 according to a new report – Data from Cornwall Insight’s Business Energy Cost Forecast indicates that these businesses are expected to incur annual electricity costs of around £550,000 (£238 per MWh) during the contract year from April 2026 to March 2027, marking a 57% rise from pre-energy crisis figures. The forecast aligns with the typical April to March contract renewal period for most businesses and highlights that, while energy costs for small industrial businesses have decreased from the highs seen in 2022-2023, which nearly reached £1 million annually, the lingering effects of the energy crisis and geopolitical factors, such as Russia’s invasion of Ukraine, continue to impact the wholesale market. In the coming years, the introduction of new carbon levies and changes in cost structures are expected to contribute to rising electricity prices from April 2026, with many experts identifying similar trends for both small and large industrial and commercial customers.

Ofgem probes energy giants over smart meters – The energy regulator is investigating British Gas, EDF, E.ON, Octopus, OVO, and Scottish Power for compliance with smart meter installation and operation requirements. The investigation aims to ensure these companies are installing the required number of smart meters and that existing smart meters are functioning correctly.

World moving into a ‘very different’ energy era, says IEA – The International Energy Agency’s World Energy Outlook 2024 report highlights a potential surplus of oil and gas in the coming years, offering an opportunity for governments to increase investments in clean energy, alongside potentially driving down the wholesale cost of gas.

UK energy supplier switching reaches new high – For the first time since October 2021, the number of UK households and businesses switching energy suppliers has exceeded 300,000 in a single month.