Front-month gas prices saw some volatility in response to uncertainty over mixed weather forecasts. The recent cold snap which had pushed demand to winter highs came to an end and temperatures over the weekend rose to above seasonal-normal levels.
Gas demand dropped below 310mcm, from highs of 390mcm the previous week.
Interconnector imports were strong for most of the week and Norwegian flows via Langeled continued at a maximum rate. Medium-range storage withdrawals slowed as demand dropped and stocks remain high for this time of year. However, forecasts indicate a sharp cold spell beginning this weekend with temperatures more than five degrees below seasonal-normal. The expected increase in heating demand has pushed March gas prices up 5% this morning to 54p/th, close to their highs for the year. Longer-dated gas contracts are also higher but gains are more gradual, with annual contracts still close to their lows from October 2017.
Forward electricity prices remained closely tied to movements in the gas market. Contracts across the curve were marginally higher but trading sideways close to their lows from autumn 2017. This reflected a stability in the gas contract and little change in the fundamental price drivers. Peak demand remains low for the time of the year, despite a recent spell of below seasonal-normal temperatures. Strong wind output last week helped cap the Day-ahead power market around £48/MWh and reduced the use of gas in the generation mix. Wind output has dropped to 1GW today but supply margins remain strong. Forecasts for a cold snap at the end of February could lift demand to its winter highs and prompt prices are over £50/MWh this morning. Longer-dated power contracts had moved lower at the start of the month, responding to strong losses in the coal market. However, annual contracts have since stabilised, moving sideways for most of the last week.