Weekly UK Insight - 10 December 2018

Gas

p/therm 30 Nov 18 7 Dec 18 Change
Day-Ahead (DA) 63.40 60.70 -4.3%
Jan 2019 67.54 63.30 -6.3%
Summer 2019 55.76 55.40 -0.6%
Winter 2019/20 63.89 63.72 -0.3%

Source: Reuters

The UK’s Day-Ahead gas price slid 4.3% to 60.70 p/therm reflecting a balanced system and expectations for a ramp up in gas imports from Norway.

Pipeline flows through Norway’s Vesterled pipeline are currently down at just 9 mcm/d as a result of an unplanned outage at the Oseberg gas field.

However, BBL pipeline imports from the Netherlands are expected to rise from 16 mcm to 30 mcm towards the end of the week.

Two LNG tankers have been delivered to British LNG terminals over the weekend, with two more arrivals scheduled within the next week.

Summer 2019 gas prices fell 0.6% to 55.40 p/therm tracking losses in European gas markets.

Belgium’s nuclear operator Electrabel – an Engie subsidiary – has confirmed that the Belgium’s nuclear reactors are gradually being brought back online. Doel 4 has a capacity of 1,000MW and should once again be able to generate electricity on 15 Dec, with two more reactors expected to return to service by the end of the month.

The additional power capacity will limit the demand for gas in Northwest Europe, which have been at risk of soaring if temperatures on the Continent dropped substantially below seasonal normal levels. This could have had a greater impact than normal with the introduction of Nemo Link power interconnector which is expected to come fully online at the end of January 2019.

UK NBP

Weekly UK Insight 10 December 2018
Source: Reuters

Power

£/MWh 30 Nov 18 7 Dec 18 Change
Day-Ahead (DA) 60.44 50.60 -16.3%
Jan 2019 65.98 62.95 -4.6%
Summer 2019 56.13 55.86 -0.5%
Winter 2019/20 61.86 61.76 -0.2%

Source: Reuters

Day-Ahead power prices fell 16.3% to £50.60/MWh as milder weather across the UK and Europe reduced power demand and strong wind speeds supported supply.

Summer 2019 power prices slid 0.5% to £55.86/MWh, falling in line with the equivalent gas contracts.

The new 1,000MW Nemo subsea power interconnector that links the UK and Belgium has started commissioning. The project will enable trade of electricity between the UK’s National Grid and Belgian transmission system operator Elia when it becomes fully operational in early 2019. In particular it will help support power capacity in both countries during times of peak winter demand.

UK POWER BASELOAD

Weekly UK Insight 10 December 2018
Source: Reuters

Oil

$/bbl 30 Nov 18 7 Dec 18 Change
Brent Crude Feb 19 58.71 61.67 5.0%

Source: Reuters

Brent crude oil prices rose 5.0% to $61.67/bbl last week as oil cartel OPEC agreed to cut production by more than 1 million bpd in a bid to boost prices. The cuts are due to start in January and last six months.

The plans come as the industry is grappling with a roughly 30% slide in prices since October. The fall has been spurred by forecasts for lower demand, as well as a surge of shale production in the United States.

Venezuela, Iran and Libya – countries where the industry has already been disrupted by U.S. sanctions or unrest – are exempt from the plans.

BRENT CRUDE OIL – MONTH-AHEAD

Weekly UK Insight 10 December 2018
Source: Reuters

Exchange Rates & Economics

£/$ 30 Nov 18 7 Dec 18 Change
GBP/USD 1.2751 1.2726 -0.2%

Source: Reuters

The value of the Pound Sterling slid 0.2% versus the U.S. Dollar last week, as GDP growth in the three months to October slowed to 0.4%, while UK manufacturing output shrank by 0.9%.

However, despite concerns over Brexit’s impact on the UK economy, a weaker Pound Sterling will make British goods cheaper and more attractive to foreign buyers.

MPs are scheduled to vote on Theresa May’s Brexit deal in Tuesday 11th Dec, with the outcome uncertain.

EXCHANGE RATE – GBP/USD (£/$)

Weekly UK Insight 10 December 2018
Source: Reuters

Regulatory and Market News

New Nemo Link cable between the UK and Belgium begins final phase of commissioning

The 1,000MW Nemo subsea power interconnector that links the UK and Belgium has officially been launched.

Stretching 80 miles from Herdersbrug on the Belgian coast to Richborough in Kent, the £600 million Nemo Link will help deliver a more flexible energy system for consumers in both countries.

The project will enable trade of electricity between National Grid and Belgian transmission system operator Elia when it becomes operational in early 2019.

John Pettigrew, Chief Executive of National Grid said: “Nemo Link will bring great benefits to consumers in the UK and Belgium by offering both countries access to a broader energy mix and providing opportunities to expand into other electricity markets.

“By connecting the UK and Belgian electricity markets, we will ensure customers have access to different sources of generation and lower priced electricity. This will mean that customers pay less for their energy.”

National Grid added it will be investing more than £2 billion in new interconnectors to Europe over the next five years. Last month, it received financial approval for the construction of the 1.4GW Viking Link, which will connect the UK with Denmark.

Business and Energy Secretary Greg Clark said: “Nemo Link is the UK’s first interconnector since 2012, increasing our electricity capacity from these power cables by a quarter and further enhancing security of supply for us and Belgium.

“Not only will this interconnector help us to accommodate more renewable energy on our grid and provide cheaper, greener energy for consumers as part of our modern Industrial Strategy, it will also see continued and close cooperation on energy across borders with our European partners.”

LINK: Nemo Link – Interconnector begins commissioning

New 4MW gas peaking plant in Doncaster added to National Grid

Suncredit Energy has successfully completed the testing and commissioning of its 4MW gas to power peaking project near Doncaster. The project has been generating power since the initial testing phase and is now fully operational to deliver secure decentralised power when it is needed most.

Suncredit’s Development Director, John Leith, says, “SmartestEnergy have provided an optimisation strategy to help us secure the maximum value from opportunities in the short-term energy markets. We received the first notification to dispatch at 09:11 on Monday 26th November and ramped up in less than 120 seconds.”

Suncredit’s next gas to power peaking project (20MW, near Taunton) is currently under construction and due for delivery in 2019. In response to its continued development success, Suncredit has now increased its peaking construction program for 2019/20 to over 130MW.

Alongside its ongoing work in solar, storage and behind- the- meter solutions in the UK and abroad, this portfolio approach puts Suncredit in an increasingly robust energy generation and asset management position.

LINK: Suncredit – 4MW gas peaking plant

Download

Disclaimer: These views and recommendations are offered for your consideration and Beond makes every effort to ensure that the data and information in this report is accurate. However, due to the volatile and unpredictable nature of the energy markets, Beond cannot guarantee the accuracy of both the information and the recommendations provided. Beond does not accept any responsibility for errors or misstatements, or for any direct, indirect, consequential or other loss arising from any use of this information and/or further communication in relation to this information.