ENERGY MARKET UPDATE – 25th May
This energy market update delves into the significant fluctuations influenced by various geopolitical and supply factors. Today, the full shutdown of the Norwegian LNG refineries at Kollsnes and Troll has removed 158 million cubic meters per day (mcm/d) of gas from the market. This reduction in flow to both the Continent and the UK is expected to start impacting prices from tomorrow, potentially exerting bearish pressure on day-ahead (DA) pricing for the National Balancing Point (NBP).
Yesterday’s price increases were driven by multiple factors, including the unexpected death of the Iranian President, slightly reduced LNG flow to the Continent, and the added supply risk from the complete shutdown of two major LNG refineries. These elements combined to create a volatile market environment.
Today, UK front-month gas prices continued to rally, breaking through the 80p mark to reach the highest levels since April 19th. Front-month UK Power finished the day at £75.00, reflecting a gain of 3.02%, while front-month NBP gas increased by 4.07% to 82.79p. Carbon Dec24 EU Allowances (EUA) also saw gains, rising 0.31% to €76.49, and UK Allowances (UKA) increased by 0.39% to £43.50. However, Brent crude prices fell by 0.80%, closing at $82.22.
Further into the day, UK Power and Gas front-month and near-term contracts rallied in the afternoon session following news from Germany about a 34% increase in the levy for counterparties purchasing gas directly from their storage facilities. This price hike is also attributed to the lack of supply from the Nordic refineries to the Continent.
By the end of the day, front-month UK Power had finished at £72.84, up by 3.32%, and front-month NBP gas had gained 3.02%, reaching 79.02p. Carbon Dec24 EUA prices rose by 2.22% to €75.87, and UKA prices increased by 0.75% to £43.20. Brent crude closed at $82.64, marking a 1.28% decline.
These market movements highlight the sensitivity of energy prices to geopolitical events, supply disruptions, and regulatory changes, underscoring the complex and interconnected nature of global energy markets.
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