European gas storage levels remain abundant, at 65% capacity

26 February 2024

This morning

Prices have edged higher in the UK gas market this morning, with the front month contract March-24 last trading at 57.60p, a 1.14p premium to Friday’s settlement. The front seasonal contract, Summer-24 has followed a similar trajectory, moving 0.94p higher to trade at 58.23p. With a shift in weather fundamentals and a colder spell forecast in the coming days, the UK gas system has opened marginally undersupplied, as demand is forecast at 269MCM today. Three LNG cargoes are forecast to arrive at UK ports this week, all originating from the US. In the wider energy fuel complex, European carbon prices have picked up where they left off, as the EUA Dec-24 contract last traded at €52.41 a tonne.  

Gas Market

UK gas prices took a further step backwards on Friday on the eve of the two-year anniversary of the Russian invasion of Ukraine. The risk premium linked to energy crises and the absence of Russian pipeline gas in Europe appears to have completely eroded, as the Summer-24 contract closed at 56.46p on Friday its lowest level since October 2021 and a significant discount to its peak of 455.39p in August 2022. Aggregated European gas storage levels ended the week at 64% capacity and are still forecasted to end the winter gas season above the five year average, while the UK’s storage levels are at 73% fullness, as weakness in demand has enables storage injections. In the prompt market contracts also moved lower, the Day ahead and Within day contract settled at 57.50p and 57.50p respectively.  

Power Market

Mixed movement was recorded in the GB baseload power market on Friday. The front month contract March gained £0.45/MWh to close at £55.60/MWh while the front seasonal contract Summer-24 edged £0.58/MWh higher to end the session at £55.63/MWh. Longer dated contracts moved in the opposite direction and aligned with the sentiment in the UK gas market. Baseload power for day ahead delivery closed at £58.05, a £1.46/MWh discount to the previous session. On Friday, the EUA Dec-24 carbon contract plunged to €51.08, its lowest level since July 2021. However, it bounced back in the afternoon and recouped the losses, eventually closing at €0.03 higher at €52.51 a tonne.

Oil Market

Downward momentum returned to the global oil markets on Friday as the Brent crude front month shed $2.05 to settle at $81.62 a barrel. The market dipped lower after the US central bank indicated that a reduction in interest rate cuts won’t happen for at least two more months. The announcement added pressure to a market that is already under pressure, as weak Chinese macroeconomic data amplifies demand concerns. In the US, commercial crude stocks have increased for four consecutive weeks. However, this rise is primarily due to lower refinery activity, with utilisation rates consistently below 85% during this period. Brent crude front month contract has traded at an average $81.33 a barrel so far this month.