The requirement for substantial storage injections continue to support balance of summer prices. European storage sites have begun injections earlier than in previous years, taking advantage of very mild temperatures seen in mid-April. Reserves have risen by 4.5bcm so far this month but injections of around 60bcm are still required to return stocks to levels seen at the start of last winter. This equates to 385mcm of injections every day for the rest of the summer.
Unplanned Norwegian maintenance is also supporting prices by disrupting available supply. Scheduled North Sea work is expected to ramp up next month.
Nine LNG tankers have reached the UK in April. However, while this is up from six in April 2017, volumes are still down year-on-year as more small tankers arrive. A spell of below seasonal-normal temperatures has arrived this week, pushing demand back above 250mcm, and adding further support to prompt gas prices.
Day-ahead power prices rose to highs of £55/MWh last week on sharp fluctuations in wind output. Prices had been depressed by low summer demand and strong renewable output. Wind topped 9GW on several occasions and the UK set a new record for consecutive hours of coal-free generation, lasting three days. However, by Friday wind output had dropped to just 0.5GW.
Increased gas use and more than 3GW of coal plant coming online met the additional 8GW of demand. The higher cost of generation from fossil fuels supported prompt prices. Rising gas, coal and carbon prices in April have helped push longer-dated power contracts to new multi-year highs. Annual electricity prices are up 15% since mid-February, driven upwards by the rising cost of generation.
Carbon costs have settled at €13, having doubled so far this year, while coal prices have rebounded strongly this month, despite April being traditionally weak for demand. Colder and darker weather conditions this coming week will limit the influence of solar availability, but wind output is expected to rise, peaking at over 7GW today.