WHAT IMPACTED ENERGY PRICES IN SEPTEMBER 2023?

TOP 3 FACTORS AFFECTING ENERGY PRICES

• Norwegian gas flows recover as September draws to a close
• Threats of industrial action in Australia ends
• Oil prices rally throughout September
  

As the winter months drew closer, September was another month where prices overall remained relatively rangebound. Going into the last month of summer, there were still concerns around industrial action in Australia where pay and working conditions were being negotiated. Partial strikes had started but threats of a full 24 hour strike did not quite materialise as agreements were met after pressures from authorities as the tribunal loomed on 22nd.

Market prices further out on the curve have again fluctuated throughout the month as front seasonal index’s across power and gas remained relatively flat. Win-23 and Sum-24 markets may have finished the month slightly lower but overall are still relatively rangebound. Despite concerns around Norwegian gas flows and the potential impacts on LNG from industrial strikes in Australia, (now resolved) fears of winter demand not being met wasn’t really a concern due to storage levels across Europe hitting their objectives much earlier than the November target.

This meant the outlook on winter supply remained healthy despite worries surrounding Norwegian gas flows being interrupted so close to the winter months. As LNG imports continue to gradually improve across Europe and the UK, temperatures have been forecasted to be warmer for the first couple of weeks therefore likely to see a bearish outlook on front seasonal index’s for the time being. Whether this will last in the longer term as we move deeper into winter period, will depend on forecasted temperatures beyond the middle of October along with renewable generation as demand starts to ramp up. Further out on the commodity complex has seen oil markets continue to gain momentum throughout September gaining for 3 weeks in a row.

Prices are sitting comfortably above the $90/Bbl mark as concerns around faltering economies (impacting demand) has been overshadowed by production cuts which were initially scheduled until the end of September but have now been extended until the new year. A fall in U.S inventories have also supported bullishness within oil markets. As the focus shifts to a tighter supply due to the cuts, and expectations of economies recovering, especially in China, the outlook on Brent/Crude will remain bullish and likely to keep prices elevated at the levels we are currently seeing at the moment.

Market Outlook

Winter is now upon us, and as we move deeper into September, we are likely to have more clarity around temperatures for the beginning of October. As it stands, we could see the warmer weather we are experiencing now continue throughout September, with temperatures staying above seasonal norms heading into October.

With gas storage levels already achieving their targets earlier than expected, there is a case that we could see markets experience some downwards trend especially in the beginning of October, this could be also supported with improving LNG imports coming into the continent. With that said, concerns around LNG could prove to be a stumbling block for any further losses coupled with outgoing maintenance in Norway. This is likely to keep contracts relatively rangebound in the short term at least. If these particular drivers continue to escalate throughout September, there is likely to be more upside risk than downside especially as we are entering the winter months.

With wind generation continuing to be inconsistent, volatility in short term contracts will continue to persist with Day-Ahead prices taking much of the burden. Overall, we anticipate markets to remain relatively rangebound as we head into the winter months, with prompts contracts leading towards the bullish side for the time being.