Despite increased demand levels following the return of schools and industry from the August holiday period, oversupply in the markets have weighed heavily on prices.
Day-ahead gas bounced off the seven-year lows hit last week, but have since fallen again, weighed down by an oversupplied system. A strong rise in LNG supplies this month has boosted sendout from South Hook, while the impact of heavy maintenance in Norway has been largely restricted to the Continental European markets. Four LNG tankers are already booked for this month, after just five tankers arrived in August. Flows from the UK Continental Shelf have also risen after fields and terminals return from summer maintenance. Exports to Europe remain strong, with the UK frequently acting as a transit nation for Norwegian gas heading to the Continent. Demand has also been lifted by increased injections into mid-range storage. However, despite this the UK gas system has been frequently oversupplied.
Power contracts maintained a tight correlation with movements in the gas market. Falling gas prices and market oversupply weighed on short-term power contracts in the last week, although losses were more gradual than those seen in gas. Wind generation has risen steadily so far this week, with forecasts suggesting a peak of over 6GW on Friday. Nuclear output reached its highest levels since December 2015 at 8.8GW, further boosting supply. Although, generation has fallen recently following an unplanned trip at the Hartlepool 1 unit. It is unclear when the unit will return online. Day-ahead power prices have fallen more than 20% this week on healthy supply-demand fundamentals, dropping to lows of £30/MWh.