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Geo-Political Issues Cause Prices to Rise

UK Energy Market Update

March 2024

Market Summary

Europe has ended heating season and the energy ‘winter’ period with EU gas storage at a record level of 58%. Milder than usual weather through much of February and large parts of March has meant that storage withdrawals have been somewhat less than expected. While there is potential for cold spells through April, this has put the region in a strong position going into the injection season, which should make the refilling of storage manageable. Storage is expected to be 100% full ahead of next winter but there are lingering concerns that adverse weather, supply disruptions and demand from Asia may hamper Europe’s plans of stockpiling for next winter.


According to data from National Gas, LNG send out volumes have fallen to the lowest level seen so far this year amid a recent lull in cargoes of the fuel. The largest gas producer in the US plans to slash its output significantly through March as a response to falling prices. EQT Corp will reduce production by about 30 to 40 billion cubic feet per day, which is roughly 30% to 40% of its total US gas production, which is about 100 billion cubic feet per day. This coupled with reduced gas flow at Texas’ Freeport LNG terminal and the Corpus Christi LNG facility have created market uncertainty around security of supply.


This year, the US is expected to continue as the world’s leading supplier of LNG. Estimates indicate the country's exports will grow by 4% annually, to reach about 46.5 million tonnes. The increased production capacity at the Freeport LNG facility and the Calcasieu Pass LNG facility’s additional 0.4 million tonnes of volume are expected to be the main drivers behind this.

Shell Energy have predicted that global LNG production will increase by over 50% by 2040. This is because many large gas customers are switching from coal to gas for power generation. Also, countries like China and India are likely to increase their gas demand in the future.


By the end of the decade, European countries aim to invest in about 249 billion cubic meters of additional LNG capacity and 46 billion cubic meters of cross-border pipeline capacity each year. These projects are estimated to cost the EU around 84 billion Euros. The proposal was suggested as a result of Russia’s invasion of Ukraine, which significantly reduced Russia’s gas supplies to the EU.


March saw multiple Russian attacks on Ukrainian energy infrastructure. Power stations and underground gas storage facilities were targeted in attacks that resulted in the nation losing more than 20% of its power generation capacity, causing large-scale blackouts and supply disruptions.


UK energy secretary Claire Coutinho emphasized the need for at least 5 GW of new gas-fired capacity to ensure the UK’s energy security. She noted that about 15 GW of gas plants are expected to shut down in the coming years. Her speech coincided with the launch of the Review of Electricity Market Arrangements (REMA) consultation. This consultation seeks industry input on reforms like zonal electricity pricing – dividing the country into six regions with generators receiving varying prices based on their proximity to demand centres – as well as Contracts-for-difference (CfD) auctions, and the capacity market.

Net Zero News

Government data has revealed that Britain's greenhouse gas (GHG) emissions dropped by 5.4% in 2023. This decline was attributed to reduced gas usage for electricity generation and heating homes. Achieving the country's goal of reaching net zero emissions by 2050 will necessitate changes in people's eating and travel habits, as well as modifications in electricity production methods.


Decarbonising steel production is seen a key goal to achieving global net-zero emissions targets and the good news is that it is achievable, and the cost isn’t prohibitive for some uses. The negative side is that decarbonising steel isn’t going to happen with regulation and price incentives that can drive a shift in investment and consumption.


During the winter of 2023/24, renewable energy sources like wind, hydro, and solar outperformed gas stations in the UK. According to data from the Energy and Climate Intelligence Unit’s (ECIU) Power Tracker, renewables produced around 55TWh (terawatt hours), exceeding the estimated 45TWh generated by gas.


The latest government report highlights significant shifts in energy dynamics, especially in consumption patterns, during the October to December 2023 period in the UK. Primary energy consumption in the UK dropped by 2.1% when measured by fuel input, largely due to higher energy prices.

A £3.4 billion funding package has been proposed for the Eastern Green Link 2 (EGL2), a 500-kilometre electricity superhighway linking Scotland and Yorkshire. This project aims to provide power to approximately two million homes through a subsea and underground cable connection between Peterhead in Aberdeenshire and Drax in North Yorkshire.


A parliamentary watchdog has reported that Britain's efforts to reduce emissions in the home heating sector are being hindered by the slow adoption of heat pumps.


Ofgem is considering introducing dynamic energy price caps to accommodate changing consumer behaviours and market dynamics. The regulator recognizes the shifting landscape of energy consumption, as more households adopt electric vehicles, heat pumps, and solar panels, resulting in fluctuations in energy demand and supply.

Electricity and Gas Prices

March was a negative month for gas and electricity prices in the UK. The main drivers behind the increases are geo-political tensions in the Middle East and Ukraine as well as a lack of LNG cargoes available to Europe. Mild weather and healthy gas storage as we exited heating season are bearish drivers keeping prices in check. Day ahead pricing continues its volatile trend and ranged between 11.00 to 75.09 £/MWh.

Flexible Purchasing

EPEX Price

Some of our flexible purchasing customers are buying on EPEX, a European auction for power. Because they auction every hour of each day, customers get the “market average” price as opposed to a fixed-term contract over e.g. a 12-month period. Being on this product means that you will pay the average of each day for the month and once the market falls the price will follow.


The EPEX price finished the month with an average of 6.13 p/kWh (commodity). With the non-commodity added to this, the overall rate will be around 17.03 p/kWh+.

Carbon Prices

In March, European carbon experienced its first monthly increase of the year, with the EUA price surging by approximately 11%. The month closed with the EUA price at around €62, marking a 26% increase from the February low of around €49. Despite some fluctuations, the overall price movement was positive, characterized by three intra-month rallies of over 10%, with relatively minor declines.

Oil Market

8th - Brent crude oil prices are up, driven by reports of rising Asian demand. China's crude oil imports surged by approximately 5% in the first two months of the year compared to the same period last year. Furthermore, India's oil consumption saw a 6% increase in February, fuelled by robust factory activity in the country.


14th - Brent crude oil prices climbed as data indicated a rebounding demand in the US and heightened concerns over supply from Russia. The previous week, US crude oil inventories fell by about 1.5 million barrels, contrary to analysts' expectations of a 1.3-million-barrel rise. Additionally, a drone strike targeted one of Russia's major oil refineries in Ryazan by Ukraine, adding to market uncertainty.


18th - Oil prices have extended their upward trend from the week prior, due to concerns about supply risks, leading to market uncertainty following further attacks on Russian oil refineries. Another attack targeted Russia's Slavyansk refinery, which annually processes approximately 8.5 million metric tonnes of crude oil. Analysts estimate that these strikes have affected about 7% of Russia's refinery output in the first quarter.


21st - Oil prices have edged up on news of an unexpected drop in oil reserves. Crude inventories have fallen for the second straight week. Last week, inventories saw a notable decrease of 2 million barrels, contrary to investors' predictions of a 13,000-barrel increase.


25th - Oil prices have risen due to heightened supply concerns stemming from escalating conflicts in the Middle East and between Russia and Ukraine. Cease-fire negotiations in the Middle East show no progress, while tensions persist between Russia and Ukraine, with ongoing attacks.


28th - Oil prices have remained steady, with crude trading at $85.6. The previous week, crude oil stocks in the US surged by over 9.3 million barrels, bringing inventories to 363 million barrels, the highest level since April of the previous year.

Get in Touch

Our team are independent energy advisors who provide competitive gas, electricity, and water prices for commercial businesses across the region.


Our complete energy management service also includes helping businesses to identify potential savings through energy audits, tax levy rebates and grant funding. We can also help you plan for Net Zero and achieve compliance with our in-house ESOS assessment service.

Contact us for a free initial consultation about your business energy.

0114 327 2645


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