Day-ahead gas prices were weakened by falling demand as the summer season got underway. A revision in temperatures has shown above seasonal-normal conditions for most of April. This comes after a far colder March than previously expected, as two severe cold snaps left the UK using 1.5bcm more gas last month than in March 2017. The impact has left storage reserves in the UK and Europe around five year lows. With injection demand high on the Continent and capacity low in Britain, the UK has moved to exporting gas to Belgium over the Interconnector. The UK is acting in part as a transit nation for Norwegian supply to Europe. The milder temperatures have cut domestic demand while higher winds and lower electricity consumption helped curb gas for power generation.
Total gas demand dropped to six month lows last Friday. Supplies have also been boosted by a strong LNG delivery schedule for April. Six tankers are now booked with volumes close to that seen for the whole of March.
Electricity contracts were little changed last week, echoing stability in the gas market.
Prices saw little movement as trading activity was limited by the Easter holiday period.
Milder and brighter weather conditions added downside to short-term contracts as peak consumption fell below 40GW. Longer evenings are reducing lighting demand and shifting peak consumption to 8pm in the evening. Increased solar generation is also having an impact on demand as the summer season commences. A solar peak of nearly 9GW was recorded last week, the fourth highest day on record. This contributed to a 6GW drop in lunchtime demand from the previous day as homeowners were able to generate their own supply from solar panels, rather than drawing demand from the transmission grid.
Longer-dated power contracts moved sideways across the week but remain elevated following the raised carbon costs for fossil fuel generation. The cost of allowances for 2018 remain above €12/tCO2e, nearly three times higher than this time last year.