Day-ahead gas prices hit highs from April 2015 at 48p/therm, supported by rising demand levels as cooler temperatures prompted a significant rise in domestic heating consumption.
LNG sendout remains low following a very quiet October delivery schedule when just two tankers were booked. The UK is still yet to experience a prolonged cold spell and how the system responds to a sharp demand increase will likely shape price movements for the rest of the season.
Gas prices reversed some of their earlier gains yesterday. Above seasonal normal temperatures and the expected return of Rough storage withdrawals next month have helped to slow the recent upward trend. However, the market remains elevated, hovering just above their earlier October highs. It remains to be seen whether the upward trend in gas prices will resume, particularly if temperatures fall later in the winter season. Otherwise this could be the start of a correction.
Power prices continue to rise, extending a long-running upward trend as the market continues to price in concerns over security of supply for the winter season. Day-ahead prices have already experienced several spikes in recent weeks as a result of tight margins and this situation is expected to continue for most of the winter. Peak demand levels are set to rise around 2-3GW next week as the end of British Summer Time results in darker evenings. The UK remains heavily dependent on gas-fired generation to meet demand as the UK adapts to lower coal capacity and reduced import availability. France continues to struggle with low nuclear plant availability with further shutdowns expected to keep supplies tight until at least the New Year, affecting interconnection across Europe.