Weekly Market Update for 19 November 2018

Weekly Market Update for 19 November 2018

Gas prices continued to move higher last week. Short-term contracts posted the strongest increases, driven by forecasts of below seasonal-normal temperatures in November.

Day-ahead prices rose 11% in anticipation of demand reaching 300mcm, an increase of around 70mcm from the previous week. December gas prices rose 7%. However, the gains have been fully reversed during trading today. Weather forecasts have shifted 3 to 4 degrees warmer and the cold spell is now not expected to materialise.

With demand now lower than previously forecast and gas supplies remaining strong, balance of winter contracts have fallen 6% this morning. Losses have spread across the curve and contracts have given back nearly all their gains from last week.

December gas prices have fallen to 67p/th today. Storage stocks remain full, with European reserves at their highest level for this time of year since at least 2012. November withdrawals from European storage are less than half the rate seen in previous years. UK storage stocks are at capacity with 15TWh of gas in medium-range sites. LNG deliveries have continued in November, with ten tankers booked so far, the most arrivals since May 2016.

Electricity prices continued to climb last week, following gains in gas and carbon, which increased the cost of generation.

Short-term contracts posted the strongest weekly gains with the December contract up 8%, while 2019 seasonal prices were up 3%. Day-ahead power prices began to climb in anticipation of colder temperatures and higher demand. Power contracts were recovering some of their October losses. However, weather forecasts have since changed today and gas prices have fallen 6%, reversing all their gains from last week.

Carbon costs have also fallen back to €18/tCo2e this morning. Electricity contracts have subsequently fallen this morning, reversing most of last week’s rally, to return to levels seen in the first week of November. Power demand is still expected to rise this week, with darker evenings and lower winds pushing demand to 47GW on Thursday, a new high for the winter.

Ross Moffat

Posted by on Monday, the 19. November at 14.45

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.