Weekly UK Insight - 13 January 2020


p/therm 3 Jan 20 10 Jan 20 Change
Day-Ahead (DA) 29.45 29.40 -0.2%
Feb 2020 33.07 30.45 -7.9%
Summer 2020 31.54 29.29 -7.1%
Winter 2020/21 45.11 43.18 -4.3%

Source: Reuters

The UK’s Day-Ahead gas price fell 0.2% to 29.40 p/therm, as continued strong gas send-out from all three UK LNG terminals and mild weather for the next few days left the UK gas system broadly balanced.

Total LNG send-out has dropped to 64 mcm/d this morning, although this is still relatively strong for this time of year. There are nine LNG cargoes scheduled to arrive in Britain within the next 10 days.

Feb 2020 gas prices also fell 7.9% reflecting Europe’s well stocked gas storage, mild weather forecasts and seasonally weak power demand. Plentiful LNG deliveries have meant that withdrawals from gas storage has been limited. As a result, gas stockpiles across Europe are still around 83% of total capacity.

The Summer 2020 gas price declined 7.1% week-on-week to 29.29 p/therm. The UK and Europe’s high levels for gas storage, combined with record deliveries of LNG, mean the outlook for next summer’s supply and demand balance continues to look extremely comfortable.

Prices also fell after Russia and Ukraine signed a five-year, $7 billion deal on the transit of Russian natural gas to Europe following intense negotiations ahead of a year-end deadline. The current agreement was set to expire on 31st December, risking Europe’s vital link to billions of cubic meters in gas from Russia via Ukrainian pipelines in the depths of winter.

The conflict between the U.S. and Iran has settled slightly after Iran admitted ‘unintendedly’ shooting down a Ukrainian airliner, killing 176 people.


Weekly UK Insight 13 January 2020
Source: Reuters


£/MWh 3 Jan 20 10 Jan 20 Change
Day-Ahead (DA) 33.53 32.78 -2.2%
Feb 2020 41.99 39.56 -5.8%
Summer 2020 40.01 38.36 -4.1%
Winter 2020/21 49.94 48.14 -3.6%

Source: Reuters

Day-Ahead power prices fell 2.2% to £32.78/MWh, tracking cheaper European spot power prices.

Summer 2020 power prices dropped 4.1% to £38.36/MWh in response to losses in the equivalent gas, oil and carbon markets. The lower rate of coal use in power production means gains in coal prices had limited impact on UK power.


Weekly UK Insight 13 January 2020
Source: Reuters


$/bbl 3 Jan 20 10 Jan 20 Change
Brent Crude Mar 20 68.60 64.98 -5.3%

Source: Reuters

Brent crude oil prices have had a tumultuous week since the U.S. launched a drone attack in Iraq, killing Iranian General Qassem. Prices started the week at an eight-month high. However, Iran’s unfortunate missile strike against a Ukrainian plane has resulted in calming tensions. As a result, crude oil fell 5.3% last week to $64.98/bbl.

Oil prices still react dramatically to news of tensions in the Persian Gulf, although less dramatically now than they would have before the US shale revolution. The importance of the region for oil markets is obvious, given that seven Gulf countries alone – Saudi Arabia, Iraq, UAE, Kuwait, Iran, Oman and Qatar – produced around 24 million bpd of crude oil in December 2019.


Weekly UK Insight 13 January 2020
Source: Reuters

Exchange Rates & Economics

£/$ 3 Jan 20 10 Jan 20 Change
GBP/USD 1.3086 1.3059 -0.2%

Source: Reuters

The Pound Sterling recorded little movement versus the U.S. dollar, as markets waited for progress on Boris Johnson’s plans for Britain to leave the EU on 31st January 2020.

In practice, Brexit will still not be completed on 31st January. Britain will move into an 11-month transition period when it must obey all the EU’s rules and keep paying into its budget. And the future talks will cover not just trade but standards, security, data exchange, fisheries, financial services, research and much else.

Britain’s economy contracted by an unexpectedly wide 0.3% in the month of November, adding further pressure on the Bank of England to cut interest rates.


Weekly UK Insight 13 January 2020
Source: Reuters

Regulatory and Market News

Historic moment as zero-carbon electricity outstrips fossil fuels in Britain across 2019

Zero-carbon energy became Britain’s largest electricity source in 2019, delivering nearly half the country’s electrical power and for the first time outstripping generation by fossil fuels.

Following a dramatic decline in coal-fired power and a rise in renewable and low-carbon energy, 2019 was the cleanest year for electrical energy on record for Britain, according to National Grid, which owns and operates the electricity transmission network across Britain’s power networks.

National Grid data shows wind farms, solar, nuclear energy and subsea cable imports delivered 48.5% of Britain’s electricity in 2019. This compares to 43% generated by fossil fuels – coal, gas, and other carbon sources such as oil and diesel. The remaining 8.5% was generated by biomass, such as wood pellets.

Power generation from coal has dwindled to 1.9% of the fuel mix, and Britain set a new record for going without coal-powered energy altogether in summer 2019.

By the end of this winter, the UK will be left with only four coal fired power plants. EDF Energy’s Cottam coal plant in Nottinghamshire closed this year and two other coal plants, RWE’s Aberthaw B and SSE’s Fiddler’s Ferry, are due to close in March 2020.

Other recent government figures showed that the UK’s growing fleet of offshore wind projects generated more electricity than onshore windfarms for the first time in the third quarter. Since then, wind power reached fresh highs during blustery weather in early December to generate almost 45% of the UK’s electricity on one day.

National Grid’s chief executive John Pettigrew said: “At National Grid, we know we have a critical role in the acceleration towards a cleaner future and are committed to playing our part in delivering a safe and secure energy system that works for all.”


UK SMEs signal intentions to ramp up sustainability actions

Almost two-thirds of UK small and medium-sized businesses (SMEs) have signalled their intentions to improve environmental sustainability practices due to heightened consumer awareness and new legislation, according to a new survey by Lloyds Bank.

While 64% claimed they wanted to become more sustainable, 63% have already taken steps to improve environmental performances in the past 12 months.

Just under a quarter (23%) of respondents admitted that the organisation is primarily driven by making long-term costs savings, and that any investment into sustainability would have to generate such returns. However, 22% are primarily motivated by customer and consumer pressure regarding sustainability and climate change, which has heightened in recent months due to the climate strikes and new net-zero legislation introduced by Government.

However, barriers to match these ambitions with action and investment do exist. More than a third (34%) of SMEs say they plan to use cash reserves to become more sustainable. Meanwhile, 13% say they will rely on government grants.

One key area of action for SMEs is that of energy and heat. Last year, a programme was launched by the government’s Energy Systems Catapult centre to assist SMEs in developing low carbon heating and cooling.



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