Weekly UK Insight - 4 November 2019

Gas

p/therm 25 Oct 19 1 Nov 19 Change
Day-Ahead (DA) 28.25 28.50 0.9%
Dec 2019 43.73 42.82 -2.1%
Summer 2020 40.63 39.77 -2.1%
Winter 2020/21 50.60 49.80 -1.6%

Source: Reuters

The UK’s Day-Ahead gas price edged 0.9% higher to 28.50 p/therm as falling temperatures for the next few days boosted expected demand for gas to be used in heating.

Troll maintenance until 6 Nov continues to cut the field availability by 12mcm/d, however, this outage is not expected to have a visible impact on the actual output.

In contrast, Dec 2019 gas prices fell 2.1% as ongoing strong LNG imports and comfortable gas stockpiles means Britain is expected to be well supplied during the start of the peak winter season.

South Hook, Dragon and Isle of Grain terminals have scheduled as many as 9 LNG tankers to be delivered over the next two weeks, originating from Qatar, Russia, the USA and Trinidad & Tobago.

Summer 2020 gas prices also fell 2.1% to 39.77 p/therm, as high gas storage and comfortable imports continue to weaken forward UK gas prices.

Gas storage in the EU remains around 97% of full capacity, meaning the region is heading in the peak winter demand in a strong position. Unless Britain finds colder temperatures full depleting stocks over the next few months, European stock levels are likely to remain high heading into next summer’s injection season.

Lower European gas prices, oil and coal also contributed to lower UK prices.

UK NBP

Weekly UK Insight 4 November 2019
Source: Reuters

Power

£/MWh 25 Oct 19 1 Nov 19 Change
Day-Ahead (DA) 37.18 34.33 -7.7%
Dec 2019 49.42 48.96 -0.9%
Summer 2020 46.05 45.71 -0.7%
Winter 2020/21 53.20 53.03 -0.3%

Source: Reuters

Day-Ahead power prices fell 7.7% to £34.33/MWh, reflecting a notable increase in wind output today.

Dec 2019 power prices dropped 0.9% lower to £48.96/MWh tacking gas, although higher carbon limited losses.

Summer 2020 power prices also fell 0.7% to £45.71/MWh in response to losses in the equivalent gas market, although an increase in carbon provided some support.

UK POWER BASELOAD

Weekly UK Insight 4 November 2019
Source: Reuters

Oil

$/bbl 25 Oct 19 1 Nov 19 Change
Brent Crude Jan 20 62.02 61.69 -0.5%

Source: Reuters

Brent crude oil prices fell 0.5% last week to $61.69/bbl after a steep U.S. crude oil inventory increase added to worries about a possible delay in resolving the U.S.-China trade war, which has hurt global oil demand.

OPEC is scheduled to publish its World Oil Outlook report, which should provide insight into demand expectations. The industry has been burned this year by weakening demand amid a sustained economic slowdown. So far, cuts in production have not been able to override the downward pressure.

U.S. crude stockpiles increased 5.7 million barrels last week, according to official U.S. government data from the Energy Information Administration (EIA).

BRENT CRUDE OIL – MONTH-AHEAD

Weekly UK Insight 4 November 2019
Source: Reuters

Exchange Rates & Economics

£/$ 25 Oct 19 1 Nov 19 Change
GBP/USD 1.2821 1.2934 0.9%

Source: Reuters

The Pound Sterling rose in value versus the U.S. dollar and euro after MPs backed the UK Government’s calls for a General Election.

The British people are set to go to the polls on 12 December 2019, with many hoping this will provide either the Conservatives of Labour party with a majority, allowing the winner to break the Brexit deadlock.

Campaigning from political parties officially begins this Wednesday after Parliament is formally shut down.

EXCHANGE RATE – GBP/USD (£/$)

Weekly UK Insight 4 November 2019
Source: Reuters

Regulatory and Market News

UK Government bans gas fracking in the UK after concern about earthquakes

The U.K. fracking industry suffered a fatal blow as the Conservative government ended its support for the controversial practice. The move, just weeks ahead of a general election, effectively bans new wells using hydraulic fracturing technology. Companies from Cuadrilla Resources Ltd. to Ineos Group Ltd, had been hoping to exploit reserves trapped in difficult-to-tap shale formations deep underground.

The move underscores the unpopularity of the technique, which involves injecting water and sand into well-bores under high pressure. It also indicates a growing consensus between the main political parties about the need to zero out fossil fuel emissions by the middle of the century to rein in climate change.

Prime Minister Boris Johnson’s administration acted before campaigning for an General Election starts next week. His Conservative Party is fighting to retain votes in rural areas in northern England where the shale reserves sit. However, opposition leader Jeremy Corbyn suggested that the pause was an “election stunt” and that Labour would ban fracking permanently.

Ministers decided to implement a ban on new permits for fracking wells after the Oil & Gas Authority found that it is not possible to accurately predict the probability and magnitude of earthquakes caused by fracking.

As recently as August, the government supported fracking and said it saw shale gas as a crucial domestic energy source that can cut imports and help a transition away from coal. The U.K. is a major importer of liquefied natural gas, which has transformed the market in the past in the past decade, but the price of the commodity is extremely volatile and the price paid depends on global demand.

LINK: UK Gov – Ends support for fracking

EDF Renewables agrees PPA with Tesco for renewable energy

EDF Renewables has signed three Power Purchase Agreements (PPA) with Tesco to supply renewable energy to the company. The three PPAs cover two onshore windfarms and one solar installation and will last for 15 years.

The two onshore windfarms will be located in Scotland, the first will be the expansion of Burnfoot East windfarm. The windfarm currently has a capacity of 42MW but EDF will expand this by 10.8MW.

The second onshore windfarm will also be located in Scotland and have a capacity of 43MW. EDF will also install 15,000 solar panels on 17 Tesco stores in England, which will have a combined capacity of 5MW when complete in 2020.

EDF Renewables CEO Matthieu Hue said: “We are very pleased to be working with Tesco which is already one of EDF’s biggest customers in the UK. These projects show the ability of EDF to provide diverse solutions for customers in terms of low cost renewable electricity.

Tesco CEO Jason Tarry said: “Our supply chain and long-term business sustainability depend on the health of the natural environment. Our customers and colleagues expect Tesco to play its part in caring for the planet.  This project represents a major milestone in our journey to using 100 per cent renewable electricity by 2030.”

LINK: EDF Renewables – PPAs with Tesco

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