Gas prices for today surged to five-year highs as the cold snap was set to plunge temperatures more than five degrees below seasonal-normal. At 71p/th the Day-ahead gas market reached highs not seen since March 2013, up 40% across the week. The uplift in demand has required nearly 70mcm of medium-range storage withdrawals for balancing today. High demand in Europe has led to a reduction in Interconnector and BBL flows compared to last week. With European countries also experiencing the severe cold snap, competition for supply has intensified and gas prices have risen sharply to help attract more supply.
LNG prices have narrowed their discount with the Asian market which could attract further tankers in March. Only one delivery has been confirmed this month. March gas prices have jumped 11% in the last week, approaching highs last seen in mid-December. Gains on the far curve are more gradual but prices have risen, recovering some of the losses seen in January.
The intense cold snap forecast across the UK this week has lifted forecast power demand to peaks of nearly 50GW, its highest level for more than two months. The cold weather has raised the prospect of a Triad this week, which would be the latest ever recorded.
Wind output last week dropped to lows of 0.5GW but supply has increased today and is expected to hold around 5-6GW this week as temperatures reach their coldest. The sharp rise in gas prices has also encouraged more coal-fired generation in the fuel mix. Coal use averaged 7GW on Friday, providing more than 20% of UK electricity. Day-ahead power prices climbed 30% last week, reaching highs of £64/MWh, matching the December peak during the last cold snap. Price gains spread into longer-dated electricity contracts, which have seen further support from a bounce in coal prices. Annual power prices have recovered some of their January losses, up around 1.5% week-on-week.