A sharp rise in temperatures last weekend led to a drop of more than 100mcm in gas demand.
The gas system was oversupplied most mornings last week. Interconnector and BBL imports dropped in line with lower consumption but medium-range storage withdrawals continued. Three LNG tankers are now booked for March, delivering to Dragon and Isle of Grain. While this is already an improvement on February, LNG imports are still markedly lower year-on-year.
The risk of a further cold snap at the end of March and into April has been price supportive to gas contracts across the curve, notably the front-month and season contracts. Medium-range and LNG storage stocks are heavily depleted after the recent cold snap and a further high demand situation would be problematic. Strong injection demand will also be required to replenish reserves ahead of next winter. April gas prices have risen to the multi-year highs reached in December 2017 over the risk of another cold spell.
The electricity market has followed a similar trend to gas contracts in the last week. A rise in temperatures and subsequent drop in demand has led to a crash in Day-ahead prices from the highs reached in the previous week. Prompt power prices returned to around £53/MWh after reaching nearly £100/MWh. Power demand hit 50GW on 1 March but peak consumption dropped to just 45GW by Friday.
Demand will fall further by the end of the month with the UK clock change. However, longer-dated electricity contracts have moved higher, supported by rising gas prices over the risk of a late winter cold snap.
Flexible gas supplies have been depleted and another high demand situation would leave the market vulnerable. Concerns over forecasts for colder than normal temperatures next week have supported summer energy prices. Power contracts across the curve have pushed higher since the start of March. Annual contracts are now close to their highs from January, having risen 2-3% in the last week.