Balance of Winter contracts had dropped to lows from August as mild temperatures continued into mid-November. Lower than expected heating demand, alongside very strong winds, pushed prices lower. However, forecasts have shifted colder, with below seasonal-normal temperatures returning next week.
The expected increase in heating consumption will also coincide with a drop in wind speeds, which will also raise gas demand from the power sector. Balance of Winter gas contracts have risen more than 5% during trading today, rising nearly 4p/th compared to Friday’s close. Gains have spread across the curve with Summer 19 prices a further 2p/th higher today.
In the meantime, gas supplies remain strong. LNG deliveries have continued in November, with six tankers already confirmed, keeping sendout high. An unplanned outage at the Kollsnes processing plant last week caused some within-day price fluctuation. However, the issue was swiftly resolved with no long-term problems. BBL imports and storage withdrawals covered a brief drop in Norwegian imports.
Electricity prices pushed higher last week, with further increases this morning in line with the strong uplift in gas contracts. Forward prices have been supported by higher gas prices and notably a strong recovery in carbon prices, which have increased the cost of generation. Carbon costs had dropped to lows of €15 in early November after a strong sell-off. However, the market has jumped nearly 33% since, adding €5 in value over the last two weeks. Seasonal power contracts have been recovering in line with carbon since early November, but week-on-week gains were modest at around 1%. Day-ahead power prices remained depressed around £61/MWh, following very strong wind output last week.
Wind supply peaked at 11GW on several occasions. Power demand fell around 3GW from the previous week’s highs to 44GW, as the high winds increased embedded generation.