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.