Weekly Market Update for 22 December 2017

Weekly Market Update for 22 December 2017

Winter gas prices have fallen in the last week on the back of lower demand as activity slows ahead of the Christmas holiday period. An unseasonably mild spell of temperatures is also weakening demand.

Temperatures of more than five degrees above seasonal normal are forecast up to Christmas. Total gas demand today has dropped to 280mcm, down from the highs of nearly 400mcm seen last week. Lower demand during the Christmas period should allow for injections into storage, as there remain concerns over the UK’s supply flexibility on the gas system. Medium-range storage stocks have fallen 45% in the last two weeks, as withdrawals hit record levels to cover supply disruptions.

Reserves are now just 7TWh; record lows for this time of year. Cushion gas at the Rough storage site is on track to empty by mid-January. Centrica will require regulatory approval if they want to withdraw any more from the site. The UK remains heavily dependent on imports via IUK and BBL from the Continent. Norwegian imports are also at record levels, while UKCS production remains curtailed by repairs to the Forties pipeline. Maintenance is expected to continue for between another one and three weeks.

Peak power demand has dropped 20% from last week’s highs, falling to 42GW today as businesses close for the festive period. Very high wind output next week, combined with the traditional low demand of Christmas Bank Holidays, will see peak demand drop to just 33GW. Unseasonably mild temperatures across the UK next week will also weaken consumption. Short-term power contracts have mirrored movements in the gas market, and closed the week little changed. Prices had spiked last week following a series of supply disruptions and cold weather. However, these gains have been fully reversed. In the short-term, low demand will keep prices depressed during the holiday period. However, the threat of narrower margins in the New Year remain, particularly on cold, windless days, which increase the demand for gas and coal-fired generation.

Weekly market update 22.12.17

Veronica Truman

Posted by on Friday, the 22. December at 11.31

Veronica Truman has been working in the energy industry since 2002 and currently manages the Market Intelligence, Analytics and Bureau Teams for Utilitywise. These teams are responsible for bespoke strategic consultancy projects for their clients, as well as delivering detailed analytics on clients’ consumption data. In addition to this, the Analytics team have developed models to forecast commodity and non-commodity charges out to 2040, and a market-leading Triad forecasting model.