Enexus’s latest market update, offering you the most recent insights and trends influencing the energy markets today, along with an overview of general factors that may cause market fluctuations.

Geopolitical Tensions:

• Middle East Conflicts: The recent killing of a Hamas leader in Iran and ongoing tensions in the region raise fears of supply chain disruptions, particularly through the Red Sea.
• Russia-Ukraine Conflict: Ongoing tensions and sanctions against Russia continue to impact gas supplies to Europe, as Russia is a major natural gas supplier.

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Weather Events:

• Tropical Storms and Hurricanes: Early signs of a tropical storm forming in the Atlantic could disrupt production in the Gulf of Mexico and affect processing plants on the Southwest coast of the USA.
• Seasonal Weather Patterns: Extreme temperatures (both hot and cold) increase demand for heating and cooling, thereby driving up energy prices.

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Supply and Demand Dynamics:

• Storage Levels: Current gas storage levels in the EU and UK influence market sentiment. Lower storage levels can lead to higher prices due to concerns about meeting future demand.
• Renewable Energy Production: Variability in wind, solar, and hydroelectric power production affects electricity supply, influencing prices. For instance, periods of low wind can reduce the supply of wind-generated electricity, increasing reliance on gas-fired power plants.

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Economic Factors:

• Global Economic Conditions: Economic growth or recession affects industrial activity and overall energy demand. Higher industrial activity generally increases energy consumption and prices.
• Currency Fluctuations: The value of currencies, particularly the Euro and British Pound, relative to the US Dollar, can impact the cost of importing energy.

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Regulatory and Policy Changes:

• Environmental Policies: Stricter emissions regulations and incentives for renewable energy can shift the energy mix, impacting gas and electricity prices.
• Market Interventions: Government interventions, such as price caps or subsidies, can directly affect market prices.

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Infrastructure and Maintenance:

• Pipeline and Plant Maintenance: Scheduled and unscheduled maintenance of pipelines, refineries, and power plants can limit supply and increase prices.
• Investment in Infrastructure: Delays or progress in energy infrastructure projects (e.g., new pipelines, LNG terminals) affect future supply potential and market expectations.

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Global Energy Markets:

• LNG Market Dynamics: The global LNG market is highly interconnected, with supply and demand changes in one region affecting prices worldwide. For example, high demand in Asia can divert LNG supplies away from Europe, increasing European prices.
• Oil Prices: Gas prices are often correlated with oil prices, as both are energy commodities and substitutes in some applications.

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Summary

The NBP market has continued to make gains, with the Sep-24 contract currently trading at 87p/therm. Concerns about a further escalation in the Middle East have intensified after a Hamas leader was killed in an overnight raid in Iran. The conflict remains a significant concern for market participants, as further escalation could disrupt the supply chain through the Red Sea. Additionally, there are early indications that a tropical storm may form in the Atlantic this week, which market players are monitoring. Large storms or hurricanes have the potential to disrupt production in the Gulf of Mexico and impact processing plants on the Southwest coast of the USA. In the EU, storage levels were last reported at 84.71%, closely mirroring the levels of 2023. UK storage levels have slightly increased from Monday’s figures, with the latest reported levels at 55%.

The bullish rally persists throughout, as the world braces for potential retaliatory action from Iran against Israel and the resulting impact on oil and gas trade routes and flows.

Prices are fluctuating, albeit relatively slowly, but the overall trend is undeniably upward. Each time the market experiences a decline, the new support level established is higher than the previous one. This pattern of higher lows indicates a persistent upward momentum in the market as we continue to see “one step back, two steps forward”