Supply-demand fundamentals were healthy. High exports to Europe lifted overall gas demand but this was offset by increased production in the UK and Norway. Maintenance work, which had caused supply disruption in June, has passed and there are little works planned now until September.
Storage injections had averaged 25mcm during the Interconnector shutdown, but this rate has slowed with the link’s return. Domestic gas demand continued to be squeezed by very hot temperatures across the UK. Longer-dated gas contracts pushed higher, with annual prices in 2019 and 2020 up over 4% week-on-week. Higher oil prices amid supply disruptions provided some support to the gas curve.
Gas supply flexibility remains a concern for the upcoming winter. Groningen gas production is expected to be lower again this year and cannot be called upon to rise in line with demand during the colder months. LNG imports also remain very low with no bookings confirmed for July.
The electricity market mirrored movements in gas last week. Balance of Summer contracts were little changed across the week, continuing to hold in a narrow range below the highs reached at the end of May. Lower wind output provided some support to the Day-ahead market but overall electricity demand remains at more than six-year lows.
Peak consumption last week was down around 7GW compared to five years ago. Bright and sunny weather conditions continued across the UK, increasing solar generation, which broke records for daily and weekly total generation. The boost to embedded generation reduced the call for demand on the transmission grid and led to dips in consumption during the midpoint of the day.
The cost of generation remains elevated year-on-year following substantial gains in the gas, coal and carbon markets over the last 12 months. Longer-dated power contracts followed the gas and oil markets higher, with annual contracts from October 2018 up around 3%.
However, despite the weekly rise, contracts remain below the highs from last month.