Energy market update – October

Throughout October, energy prices rose, ending the month around 8% higher.

This increase has been driven by a combination of escalating tensions in the Middle East, affecting global gas supplies, and unplanned reductions in Norwegian gas supply to the UK and Europe. 

Key drivers of market change

• Geopolitical tensions: October saw increased conflict in the Middle East, with tensions between Israel and Iran raising concerns about potential disruptions to global LNG (liquefied natural gas) supplies. Any further escalation could impact the availability of gas.
• Global supply / storage: Several factors reduced supply this month, including lower LNG production in the US and unplanned interruptions in Norwegian gas supplies to Europe and the UK. This lower supply has added pressure to prices as countries in Europe and Asia compete for available resources.
• Global demand: Mild weather and increased renewable energy generation kept gas demand in the UK and Europe relatively low. However, demand in Asia remains high, increasing competition for LNG and impacting prices globally.
• Weather: Long-term weather forecasts for the UK and Europe suggested colder-than-average temperatures in October and into November. As we move from El Nino to La Nina weather patterns, there is also a risk of colder-than-usual weather later in the year or early next year. Statistically, we are also due for a harsher winter after several mild ones.
  
  

What this means for businesses

With rising prices driven by geopolitical risks, limited global gas supplies, and colder forecasts, businesses could face higher energy costs in the coming months. Keeping an eye on energy consumption as temperatures drop may help manage expenses, especially with heating demand set to increase. Businesses might also benefit from reviewing their energy contracts for flexibility or long-term stability during this period.

Looking ahead

The energy market remains uncertain in the long term. The balance between global supply and demand will be tight until new LNG production comes online around 2026-2027. For businesses, this means that while prices may fluctuate in the short term, we could see ongoing price pressures over the next few years.

If you’re concerned about rising energy costs or want to explore options for securing your energy supply, now may be a good time to take action. Our team can help you review your energy strategy and find solutions tailored to your business’s needs.