With the November 25 delivery window approaching, UK gas and power markets remain apparently unperturbed by bullish risk factors. Front month gas prices are virtually unchanged since our last update, closing on Wednesday 22nd September at 79.5p/th and opening on Wednesday 29th September at 79.8p/th.
The co-ordinated EU and US announcements of sanctions on Russian fossil fuel exports injected bullishness into markets on 23rd October. The EU formally adopted the 19th package of sanctions against Russia, including a ban on Russian LNG imports from 1st January 27. The US also announced measures to restrict Russian fossil fuel exports, with President Donald Trump applying sanctions to Russian oil giants Rosneft and Lukoil. Brent and WTI prices gained over 5% on the news and have held firm since, with WTI remaining over $60/bbl. UK gas and power reaction was more muted, with gains across the curve largely erased over the following two sessions.
EU gas storage fullness is now deep into its fifth week without major changes in either direction. Early October 25 brought the earliest week of net withdrawals since 2020, meeting the lowest pre-winter fullness level since 2015.
However, from a supply and demand perspective, the UK is in a strong position over the first weeks of November. Latest temperature forecasts show the UK enjoying warmer than average weather from 31st October up to at least 10th November, weighing on expected gas for heating demand. Gas for power demand sees similar pressure, with wind output also expected to be above seasonal normal until the end of the forecast run on 11th November.
Demand forecasts for gas and power remain below seasonal normal as post-crisis consumption habits become permanent.
