The system remained virtually balanced, with steady imports from Norway offsetting reduced flows from the UK Continental Shelf (UKCS), as well as strong demand for gas from the generation sector. Demand was also being kept firm by continued strong exports to the Continent as the European market remains firmly in storage injection phase.
While some weakness came from lower crude oil prices, this was being offset by concerns over supply flexibility – both for the near-term and for the next winter.
In the short-term, a wave of fresh offshore maintenance is expected in August, which has raised speculation over what will change in the supply-demand balance to compensate, especially as LNG imports remain weak in the light of strong Asian demand. This may lead to storage withdrawals, which just raises fresh concerns over the winter, and how the system will cope without Rough storage and the reduced output from the Groningen Dutch gas field.
Power prices echoed the lack of net movement in the gas market. The correlation between gas and power was enhanced in the last few weeks due to the strong use of gas in the fuel mix. Low wind has required the use of CCGTs.
A small drop in coal prices may have also improved the economics for some coal-fired plant, with the use of the fuel rising a little in the last few weeks. However, the use of fossil-fuels also keeps the UK exposed to the carbon market, which remains elevated, supporting the electricity price. Offsetting the support to some degree was weak demand, which is below levels for the last few years.
The UK has not yet deployed the same level of air conditioning as elsewhere in Europe, so the sustained hot weather has not been as supportive for demand as it has been in other regions.