Weekly UK Insight - 11 March 2019


p/therm 1 Mar 19 8 Mar 19 Change
Day-Ahead (DA) 43.80 42.75 -2.4%
Apr 2019 43.07 41.95 -2.6%
Summer 2019 44.22 42.82 -3.2%
Winter 2019/20 58.00 56.34 -2.9%

Source: Reuters

The UK’s Day-Ahead gas price fell 2.4% to 42.75 p/therm as UK temperature gradually increase, reducing gas demand to be used in heating. The UK gas system is broadly balanced, with National Grid’s forecast gas demand expected at 247 mcm/d, nearly in line with the seasonal normal demand of 245 mcm/d.

Additionally, stronger UK wind power generation for the next week is forecast to reduce demand for gas to be used in power generation.

On the supply side, one LNG cargo delivered to Britain’s South Hook terminal this morning, increasing total LNG send-out to 74 mcm/d from all UK terminals. The strong LNG supply means that just three further deliveries are anticipated in the next two weeks.

The well supplied system also means that imports via Norway’s Langeled have dropped to 51 mcm/d, while gas flows from Netherlands via BBL remains at 0 mcm/d.

Summer 2019 gas prices fell 3.2% to 42.82 p/therm, pushed lower by falling global LNG prices.

The global gas oversupply continued to weigh on Asian LNG prices, driving UK gas prices lower. Overall LNG demand across north Asia remained weak with current LNG prices at the lowest level in 18 months and further losses are expected.

However, the weaker Pound Sterling and more expensive crude oil market limited loses in forward gas prices.


Weekly UK Insight 11 March 2019
Source: Reuters


£/MWh 1 Mar 19 8 Mar 19 Change
Day-Ahead (DA) 47.54 40.96 -13.8%
Apr 2019 47.49 47.19 -0.6%
Summer 2019 48.53 48.15 -0.8%
Winter 2019/20 58.54 57.96 -1.0%

Source: Reuters

Day-Ahead power prices fell 13.8% to £40.96/MWh, in response to cheaper coal prices and stronger output from both onshore and offshore wind farms.

Summer 2019 power prices slid 0.8% to £48.15/MWh, tracking losses in UK and European gas prices, as well as lower coal markets, which reduced the cost of coal as an input fuel for power production.

However, higher carbon prices limited the profitability of coal generation.


Weekly UK Insight 11 March 2019
Source: Reuters


$/bbl 1 Mar 19 8 Mar 19 Change
Brent Crude May 19 65.07 65.74 1.0%

Source: Reuters

Brent crude oil prices edged 1.0% higher to $65.74/bbl supported by OPEC-led supply cuts and U.S. sanctions against exporters Venezuela and Iran. OPEC and Russia continue to restrict crude output by 1.2 million bpd in an ongoing effort to clear up the market oversupply, with cuts scheduled to continue until at least the end of June.

However, gains were capped by falling stock markets and renewed concerns over global oil demand. Overall, in OECD Europe, oil demand plunged by a staggering 755,000 bpd in December.


Weekly UK Insight 11 March 2019
Source: Reuters

Exchange Rates & Economics

£/$ 1 Mar 19 8 Mar 19 Change
GBP/USD 1.3202 1.3015 -1.4%

Source: Reuters

The value of the Pound Sterling fell versus the U.S. dollar on uncertainty over plans for the European Union to agree a delay to Brexit.

The European Central Bank performed a U-turn last week, revealing plans to revive part of its stimulus programme after two years of weaning the eurozone off easy money. The decision should not come as a big surprise with signs of eurozone weakening, especially in Germany, and in key partners such as China, have been evident for months.


Weekly UK Insight 11 March 2019
Source: Reuters

Regulatory and Market News

Government questions whether businesses are ready for SECR and ESOS Phase 2 deadlines

Energy reporting is in the spotlight in 2019, with the ESOS Phase 2 deadline of 5th December looming and the new Streamlined Energy & Carbon Reporting (SECR) framework commencing in April. However, the Government is unsure whether businesses be ready.

In ESOS Phase 1, over 40% of businesses were non-compliant by the deadline extension date. Even among those that were compliant in time for the deadline, many left compliance until the last minute.

The Environment Agency received around a third (1,925) of total notifications of compliance in December, and 1,015 notifications of compliance in the two days before the extended deadline on 29th January 2016.

Non-compliance can bring penalties of up to £50,000, so businesses that are eligible for ESOS Phase 2 should be well on their way to compliance to avoid the late surge we saw during the first phase.

The estimated 11,900 companies required to comply with SECR will also need to start collecting data on their energy consumption from as early as 1st April 2019, to include in their next annual report. The SECR requires energy managers to calculate their carbon emissions from gas and transport and their indirect emissions from electricity.

LINK: Energyst – SECR & ESOS in spotlight

Ørsted and Northumbrian Water Group sign UK’s first Offshore Wind Corporate PPA

Ørsted and Northumbrian Water have signed the UK’s first offshore wind Power Purchase Agreement (PPA) agreement with that will see the water company take almost a third of its renewable energy demand from Race Bank offshore wind farm, which is subsidised with payments from the Renewables Obligation scheme.

Race Bank Offshore Wind farm is one of the newest operational wind farms in the UK with commissioning being achieved last year.

From March 1, 2019, Northumbrian Water will source 30% of its renewable electricity (100GWh) directly from Race Bank. The move further drives Northumbrian Water’s sustainable and renewable energy strategy, building upon its existing solar, hydro, gas to grid and advanced anaerobic digestion power generation.

The Corporate PPA will deliver approximately 100GWh per year of renewable electricity from the offshore wind farm to Northumbrian Water consumption sites in the North East, Essex and Suffolk, amounting to approximately 1TWh across the 10-year term.

As well as supporting the growth of Northumbrian Water’s renewable energy activity, the agreement will help drive down Northumbrian Water’s costs of operation through a long-term fixed price for electricity.

LINK: Orsted & Northumbrian Water PPA


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