Weekly UK Insight - 16 December 2019


p/therm 6 Dec 19 13 Dec 19 Change
Day-Ahead (DA) 33.35 31.00 -7.0%
Jan 2020 39.05 35.17 -9.9%
Summer 2020 34.70 32.27 -7.0%
Winter 2020/21 45.70 43.95 -3.8%

Source: Reuters

The UK’s Day-Ahead gas price fell 7.0% to 31.00 p/therm, as continued strong gas send-out from all three UK LNG terminals left the UK gas system around 27 mcm/d oversupplied.

Total LNG send-out has dropped to 74 mcm/d this morning, down from 136 mcm/d last week. However, 13 LNG cargoes are scheduled to be delivered into UK terminals within the next two weeks, boosting supply.

Jan 2020 gas prices also fell 9.9% 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 90% of total capacity.

The Summer 2020 gas price declined 7.0% week-on-week to 32.27 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.

The 13 LNG tankers arriving in the UK over the next two weeks originate from four different countries (Qatar, Trinidad and Tobago, USA and Nigeria). The big surprise is that 9 out of the 13 tankers have set off from the USA. Historically, Qatar has been Britain’s biggest LNG supplier, so a sudden influx of gas from the United States speaks volumes about the growing number of global gas supply sources available to Britain during times of peak demand.


Weekly UK Insight 16 December 2019
Source: Reuters


£/MWh 6 Dec 19 13 Dec 19 Change
Day-Ahead (DA) 38.72 35.96 -7.1%
Jan 2020 46.80 43.80 -6.4%
Summer 2020 42.30 40.40 -4.5%
Winter 2020/21 50.34 48.88 -2.9%

Source: Reuters

Day-Ahead power prices fell 7.1% to £35.96MWh, tracking cheaper spot gas prices.

Summer 2020 power prices dropped 4.5% to £40.40/MWh in response to losses in the equivalent gas, coal and carbon markets, with the stronger Pound Sterling also a factor in making foreign energy imports less expensive.


Weekly UK Insight 16 December 2019
Source: Reuters


$/bbl 6 Dec 19 13 Dec 19 Change
Brent Crude Feb 20 64.39 65.22 1.3%

Source: Reuters

Brent crude oil prices rose to nearly a three-month high by 1.3% on Friday last week to $65.22/bbl. A decisive British general election result and progress towards resolving U.S.-China trade disputes encouraged investors.

Oil demand growth is expected to rebound along with increased global manufacturing off the back of the agreement of ‘phase one’ of the trade deal between Washington and Beijing.

The combination of a drop for the U.S. dollar with strengthening of the pound, following the result of the UK General Election, helped boost commodities.


Weekly UK Insight 16 December 2019
Source: Reuters

Exchange Rates & Economics

£/$ 6 Dec 19 13 Dec 19 Change
GBP/USD 1.3135 1.3325 1.4%

Source: Reuters

The Pound Sterling climbed to a 19-month high versus the U.S. dollar, following a strong Conservative majority in the general election last week.

It is expected that this majority will make it easier for Boris Johnson to get his Brexit deal through parliament, removing some of the uncertainty surrounding Britain’s exit from the European Union.

The potential for an easier Brexit should boost both business and consumer confidence, at least in the short term.

However, if negotiations are unsuccessful there is still a risk that the UK could leave the EU at the end of 2020 with no deal secured. This has led to business groups urging the PM to focus on securing trade deals with countries around the world.


Weekly UK Insight 16 December 2019
Source: Reuters

Regulatory and Market News

Conservatives win historic 80 seat majority as Boris Johnson plans Brexit and major government changes

Boris Johnson has clinched a historic Conservative general election victory, winning a string of seats from Jeremy Corbyn’s Labour party in its traditional heartlands.

Johnson’s gamble of triggering a snap poll in the hope of uniting the Brexit vote in leave-supporting seats across Wales, the Midlands and the north of England paid off spectacularly, setting him on course for the Tories’ strongest performance for decades and winning a historic 80 seat majority.

Boris Johnson is wasting no time drawing up plans to run a “revolutionary” government that will see ministers sacked, Whitehall departments abolished and civil servants replaced by external experts in a bid to “reshape” the economy.

Up to a third of the cabinet face the sack in a February reshuffle after Brexit so that fresh faces can be brought in to create a “transformative” government focused on the needs of working-class voters who propelled him to a landslide victory last week.

Mr Johnson reportedly wants to create a powerful new business department — absorbing the international trade department — to secure inward investment for the UK’s poorer regions and strike trade deals across the world, according to officials briefed on his proposals.

Officials confirmed that Mr Johnson was looking to recreate an energy and climate change department because of the political imperative of tackling global warming.

Dominic Cummings, the prime minister’s chief adviser and a fierce critic of Whitehall bureaucracy, is driving the planned changes to the government machine, which will take place after Britain leaves the EU on the scheduled date of 31st January 2020.

Mr Cummings is seen in Whitehall as a revolutionary who wants to upend the established order. “Some are worried, but others in the civil service see this as an opportunity,” said one official.


Energy suppliers forced to pick up cost of £58.8m shortfall in Renewables Obligation payments

Power companies that have paid their green energy payments on time have been left to pick up the tab by others that have failed to honour their commitments.

Suppliers that have paid part or all of what they owe to the Government’s green scheme will be tapped for a further £58.8m, according to the latest data from energy watchdog Ofgem.

The Renewables Obligation buyout fund was £97.5m light for 2018-19, although three firms  – Nabuh Energy, Planet 9 Energy and Hudson Energy, which is now owned by Shell – paid  £38.7m after the 31st Oct 2019 deadline.

A recent spate of insolvencies in the energy market have been blamed in part on the requirement for companies to pay into the renewables scheme. A total of 16 firms have gone bust, or had licences revoked, owing most of the remainder. Ofgem said it hoped to recover some of the money from the firms’ administrators.

These were: Brilliant Energy, Economy Energy Trading, Electraphase, Eversmart Energy, Extra Energy Supply, GEN4U, Iresa, One Select, Our Power Energy Supply, Rutherford Energy Supply, Snowdrop Energy Supply, Solarplicity Supply, Spark Energy Energy Supply, TOTO Energy, Ure Energy and Usio Energy.



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