The UK’s Day-Ahead gas saw a small price rise of 1.5% to 19.80p/therm as demand for gas-for-power generation continued as a result of the hot weather and low wind.
Day-Ahead power rose a further 2.6% to £34.12/MWh as temperatures remained high, wind generation low and gas for power generation became more expensive.
Winter 2020/21 gas rose 3.0% last week to 35.29 p/therm, with the equivalent power price seeing a drop of 0.9% to £46.68/MWh. Gas prices have risen ahead of scheduled annual maintenance to the Norwegian gas system during late August and September.
The gas balance across Europe was more favourable for UK prices last week following the re-routing of supply seeing a surge in UK-bound gas imports via Norway’s Langeled pipeline.
The rise in gas prices towards the latter half of last week follows increases in global LNG prices due to buoyancy in Asia as well as LNG cargoes arriving from the US to support power generation amid a heatwave. However, looking forward only a single shipment 126 mcm) of LNG is expected to arrive in the UK this week from Qatar.
As oil prices continue to rise and global energy demand edges higher, gas and power prices may continue to rise. Recent drops in forward power prices reflects a dip in European carbon following muted trading.
Gas storage remains well above the 5-year average and the UK system being 12mcm/d oversupplied.
Our recommendation remains to lock in contracts as soon as possible as prices are at risk of further volatility following the easing of lockdown restrictions.