Contracts briefly pushed higher towards their May peak before late losses pushed prices back towards their June lows. As a result, price movement was little changed week-on-week.
The start of a two-week shutdown of the Interconnector link with Europe led to some volatility in the market fundamentals. Demand initially rose as exports increased ahead of the shutdown, leaving the gas system short. On the first day of the shutdown very heavy medium-range storage injections of over 40mcm kept the gas system tight, but injections have since slowed. This also coincided with a surge in wind output as Storm Hector hit Britain. Wind levels surged from under 1GW to highs of 10GW. The reduction in gas-fired generation cut total gas demand to just 133mcm, a six year low for a weekday.
However, the wind burst was short-lived and output has dropped this week. Gas flows into the St Fergus NSMP terminal remains offline until 23 June and LNG imports remain down year-on-year. Just four tankers are expected to reach Britain this month. Asian LNG prices remain at a major premium to the UK, drawing cargoes away from Britain.
Power prices also fluctuated across the curve last week echoing the volatility seen across the gas market. Day-ahead power prices were affected heavily by a surge in wind output brought about by Storm Hector hitting the UK. Having averaged just 1GW a day during June, wind generation spiked to over 10GW. Day-ahead power prices tumbled from £54/MWh to £48/MWh in anticipation of the high winds. Wind topped the fuel mix during the storm and significantly cut the use of gas in power generation.
However, by Friday, the wind had eased and Day-ahead prices returned to around £54/MWh. Forward power prices were little changed across the week. Annual contracts saw modest losses of 1-2%, which reflected a sharp drop in carbon costs during the week. However, contracts are still significantly higher year-on-year following the strong rally seen during April and May.