Below seasonal-normal temperatures lifted gas demand to new highs for the winter around 330mcm, as heating consumption increased. However, the cold spell was shorter than initially forecast and gas supplies rose in response, keeping the gas system balanced.
LNG deliveries in November are at their highest level since March 2017 and sendout reached seven-year highs at 90mcm/day, with more LNG being sent to the gas network than during the Beast from the East cold snap in March. Twelve tankers are booked for November arrival, but it remains to be seen if the recent influx will continue for the rest of winter.
Temperatures are to rise sharply this week, with above seasonal-normal temperatures forecast into the first half of December, further weakening the demand outlook. There were modest storage withdrawals last week but reserves in the UK and Europe remain substantial after a milder than expected start to winter. With little sign of a cold snap before Christmas, there is the potential for a storage overhang in 2019, depending on the forecast for Q1.
Forward power prices followed the gas market lower, giving back some of the gains seen in the previous week. Movement in the electricity market has been volatile in November, but weekly losses were more gradual than seen in gas and long-term contracts remain above their early November lows.
Carbon costs have stabilised around €20/tCO2e, which is providing some upside to power prices. However, coal prices continued to weaken, after falling more than 15% from their October highs.
The Day-ahead market climbed sharply, reaching two-month highs at over £70/MWh, as the cold temperatures and a drop in wind output pushed power demand to 48GW, new highs for the winter season.
Wind supplies dropped to 2GW by the end of the week, increasing the use of gas and coal in the generation mix. However, temperatures are forecast to rise sharply this week, while wind output is set to peak at over 10GW from Tuesday.