Weekly UK Insight - 15 April 2019


p/therm 5 Apr 19 12 Apr 19 Change
Day-Ahead (DA) 40.20 39.53 -1.7%
May 2019 41.09 38.52 -6.3%
Winter 2019/20 57.54 58.62 1.9%
Summer 2020 48.06 47.67 -0.8%

Source: Reuters

The UK’s Day-Ahead gas price slid 1.7% to 39.53 p/therm as higher imports from Norway and strong supplies of LNG led to an oversupplied market, pushing prices lower.

Gas flows via Norway’s Langeled pipeline ended the week around 62 mcm/d, compared to just 43 mcm/d the week before.

Meanwhile, two LNG tankers arrived at UK terminals over the weekend, with a further four cargoes expected to be delivered over the next eight days.

Warmer temperature forecasts have also reduced Britain’s heating demand, leaving the UK gas system around 10 mcm/d undersupplied.

However, rising carbon prices means gas-fired power generation is more profitable than coal. As a result, National Grid’s forecast gas demand is expected at 243 mcm/d, slightly above the seasonal normal demand of 222 mcm/d.

Winter 2019/20 gas prices rose 1.9% to 58.62 p/therm, driven by last week’s unplanned Norwegian pipeline outages, European price gains and higher carbon prices.

However, with temperatures on the rise and plenty of LNG deliveries, long-term supply risks are continuing to subside.

Asian LNG prices have also fallen below UK LNG prices for the first time since early 2015, which could result in UK gas prices moving lower over the next week.


Weekly UK Insight 15 April 2019
Source: Reuters


£/MWh 5 Apr 19 12 Apr 19 Change
Day-Ahead (DA) 45.39 45.06 -0.7%
May 2019 47.06 45.69 -2.9%
Winter 2019/20 59.48 60.83 2.3%
Summer 2020 50.68 51.52 1.7%

Source: Reuters

Day-Ahead power prices edged down 0.7% to £45.06/MWh, in response to less expensive spot gas prices in Britain and across Western Europe.

Winter 2019/20 power prices rose 2.3% to £60.83/MWh, tracking gains in UK gas and European power prices, as well as higher oil, carbon and coal markets, which increased the cost of coal as an input fuel for power production.


Weekly UK Insight 15 April 2019
Source: Reuters


$/bbl 5 Apr 19 12 Apr 19 Change
Brent Crude Jun 19 70.34 71.55 1.7%

Source: Reuters

Brent crude oil prices rose 1.7% to $71.55/bbl, reflecting ongoing OPEC production cuts and U.S. sanctions on Iran and Venezuela. In March, Venezuela’s oil production plunged by 289,000 bpd, falling to just 732,000 bpd.

However, reports that OPEC officials are rethinking the extension to production cuts beyond June is likely to halt gains in oil prices. The swiftness of the rebalancing effort has surprised OPEC. While OPEC committed to reducing production by 1.2 million bpd since the start of this year, U.S. sanctions have knocked even more supply offline.


Weekly UK Insight 15 April 2019
Source: Reuters

Exchange Rates & Economics

£/$ 5 Apr 19 12 Apr 19 Change
GBP/USD 1.3036 1.3081 0.3%

Source: Reuters

The value of the Pound Sterling rose versus the U.S. dollar after European Union leaders granted the UK a 6-month extension to Brexit. The new deadline of 31 October 2019 averts the prospect of the UK having to leave the EU without a deal on Friday, as MPs are still deadlocked over a deal.

Theresa May, who had wanted a shorter delay, said the UK would still aim to leave the EU as soon as possible. The UK must now hold European elections in May, or leave on 1 June without a deal.


Weekly UK Insight 15 April 2019
Source: Reuters

Regulatory and Market News

Registration open for £60m Contracts for Difference auction for less established technologies

The registration process for the next allocation round under the Contracts for Difference (CfD) scheme is now open.

It is in preparation for the third CfD auction round, expected to be opened by May 2019, as indicated by the Department for Business, Energy & Industrial Strategy (BEIS).

Projects will compete for an annual budget of £60 million for delivery years 2023/24 and 2024/25 – the capacity is to be capped at 6GW.

The Electricity Market Reform (EMR) Delivery Body says it is essential for businesses to complete and submit a registration form if they are considering applying for a CfD.

Only less established technologies will be eligible, including anaerobic digestion, biomass with combined heat and power (CHP), geothermal, offshore wind, tidal stream and wave power.

The scheme is part of the government’s strategy towards delivering “diverse, clean, secure and affordable power” in the transition to a low carbon economy.

LINK: LCCC – CfD Round 3 Registration

Green light for 1,700MW gas-fired power plant in Middlesbrough

The government has given the green light for the development of a combined cycle gas turbine (CCGT) power station in Middlesbrough.

The proposal for the £700 million Tees combined cycle power plant (Tees CCPP) with a maximum generating capacity of up to 1,700MW was put forward by Sembcorp Utilities.

It would generate enough electricity for up to 1.5 million households and businesses in the UK and use existing grid connections on the site of the former Teesside Power Station.

The project is expected to create up to 1,000 jobs during the construction phase and a further 150 in the supply chain.

Following a 3-year build phase, Tees CCPP would have a scheduled lifespan of around 30 years.

It is the third major project to be approved this year, following development consent orders granted for Tilbury 2 and Milbrook Power.

LINK: NIC – Tees CCPP Development Consent


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.