Balance of Winter contracts fell to August lows after breaking previous support levels.
While a current cold snap has lifted gas demand to 280mcm today, the gas system has coped comfortably with the system benefiting from full storage stocks, healthy Norwegian imports and bumper LNG deliveries. Medium-range storage stocks reached more than five-year highs following substantial injections so far this month. Ten LNG deliveries have been booked for October, and LNG sendout reached an eight-month high as terminals made space for additional cargoes due this week.
While strong supply offsets current higher demand, the outlook for November is forecast for a return to seasonal-normal conditions, with the current cold snap ending by Friday.
Domestic heating demand has been slow to grow, pulling front-month gas prices down 7p/th. The clock change has lifted power demand, but last week saw very strong wind, which reduced the use of gas for power generation. There is the potential for further downside to prices, if strong stocks in the UK and Europe remain, heading further into the winter season.
Electricity prices followed the gas market last week, with winter contracts pushing lower in line with healthy supplies and a mild start to the season. Seasonal contracts for 2019 also pushed lower but the far curve held within a range seen for the last two months.
Coal prices dropped back from recent highs but saw little weekly movement, while carbon costs continue to fluctuate in a range between €18 and €20/tCO2e. Day-ahead power prices jumped in anticipation of a sharp rise in demand this week following Sunday’s clock change.
Power demand is expected to peak at 46GW today, up over 10% from last week’s high, when consumption was depressed by the half-term school holidays. Supply margins are expected to be tightest on Wednesday and Thursday this week when the cold spell coincides with a drop in wind output to around 3GW.
The Triad season also begins on Thursday, with peak demand between November and February affecting business transmission charges.