As we dive into the new year, the energy market in January 2024 has proven to be dynamic, marked by favourable conditions for buyers and a continuing downward trend in prices. Here's a summary of the market reviews conducted on a weekly basis throughout the month:
Week 11th of January: A Promising Start
The month kicked off with prices maintaining their favourable position relative to the last two years, a trend that has persisted. Several factors contributed to this situation, including a mild start to winter, high storage levels, and steady LNG imports into Europe. The overall storage numbers remained robust, with EU storages reaching an impressive 84%.
Week 16th of January: External Factors and Market Resilience
As the month progressed, the downward trend persisted. Storage withdrawal remained minimal, with EU storage still at a robust 80%. Despite a temporary cold spell, the expectation was to return to milder and windier conditions. However, external factors entered the spotlight with US and UK-led strikes on Houthi militants in the Red Sea, resulting in a halt to LNG exports from that part of the world.
Geopolitical risks in the Middle East, particularly regarding shipping routes through the Suez Canal, added an element of uncertainty. Despite these challenges, the overall market sentiment remained confident.
Week 24th of January: Volatility and Market Trends
As January approached its end, the energy markets exhibited some reaction due to Geopolitical risks. However, despite these challenges, overall prices remain stable, attributed to low gas demand in the EU, ample gas storage, and favourable weather forecasts. Geopolitical risks persist in the Middle East, especially concerning Suez Canal shipping routes, but LNG continues to flow towards Europe, anticipating weaker Asian demand.
Week 31st of January: Favourable Trends and Contract Considerations
In the final week of January, gas and electricity wholesale prices continue to decrease, with recent upward movements indicating a potential time to close out April renewals. Key points include favourable pricing trends, rising UK temperatures, and confidence in the EU's ability to withstand the winter. Price volatility remains due to an unplanned outage at the Cygnus gas field in the UK, which is likely to last till Friday. Due to the growing tensions in the Middle East, oil prices are trading higher. Another fuel tanker was struck by the Houthi militants as they continued their attacks on vessels in the Red Sea, and there was a reported drone strike on US forces in Jordan.
Energy Price Cap Change: Navigating Business Energy Costs
The Energy Price cap is a mechanism to limit the costs of electricity and gas to domestic energy users. The government operated separate schemes that were designed to help businesses through the energy price crisis. The Energy Bill Relief Scheme was generous and saw businesses through the worst of the price spike in Winter 2022/23. The subsequent scheme called the Energy Bill Discount Scheme ends on 31st March 2024 and is significantly less generous. Few businesses qualify for any EBDS benefit. There are no plans to replace or extend these subsidies.
Contract Strategies: Navigating the Path Ahead
We conclude with a comprehensive look at contract strategies. It was emphasised that while long-term trends remained downward, buyers needed to carefully weigh the benefits of two and three-year deals, considering the potential for further reductions. A particular focus was placed on the importance of monitoring market trends, closing contracts for Q1 2024 renewals, and considering 12-month options for larger commercial supplies.
In summary, January 2024 has proven to be a month of opportunities and challenges in the energy market. Buyers are advised to stay vigilant, consider their contract strategies, and work closely with their Account Manager to navigate the evolving landscape successfully.
For further insights and information on the dynamic landscape of the 2024 energy market, feel free to contact us:
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