Gas prices down despite overstretched system
Gas prices shed value at the NBP on Wednesday, as key contracts continued to fluctuate within a wide range. Both the front-month and front-season contracts posted considerable losses of circa 4.8p/therm (0.16p/kWh) when compared to the previous close, despite an overstretched British system.
According to data from National Gas, system demand was forecasted to surpass 360mcm on Wednesday (around 65mcm above the seasonal norm) as sub-zero temperatures gripped Northwest Europe.
The UK relied heavily on its storage reserves in order to meet demand; data shows that withdrawals averaged at a rate of 90mcm throughout the session as operators struggled to meet a more than 55% increase in gas power demand to around 100mcm. Outlining the tightness of both the gas and power systems, the National Energy System Operator (NESO) issued an Energy Margin Notice (EMN) for the hours of 16:00 to 19:00, requesting that generators bring online additional capacity.
It wasn’t all doom and gloom, however as the latest run of our 14-day model shows that demand should begin to ease back to below seasonal norms from next Tuesday (14th January), remaining unseasonably mild until at least 22nd January.
Furthermore, LNG continues to serve as a price ceiling for British gas prices, with the latest shipping signals indicating that a healthy 6 vessels are expected to arrive at the Milford Haven and Isle of Grain terminals over the next two weeks.
In other news, funding for the UK-Netherlands Lion Link power interconnector has now been given the green light.
The ‘first of its kind’ Multi-Purpose DC connection is set to go live from 2032 and will help the two nations more efficiently pool and manage their renewable assets. This will include a direct connection to the UK’s new Doggerbank offshore wind farm, which will be the worlds largest once completed later this decade.
This morning, gas prices have so far resumed their downward trajectory, with the Summer 25 front-season contract currently being offered circa 1.5p/therm (0.05p/kWh) below its previous settlement at time of writing.
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Price commentary courtesy of Crown Gas and Power 