The UK’s Day-Ahead gas price increased 1.8% to 14.00p/therm last week as weak wind generation in the UK caused gas-fired power demand to be far higher than the previous week. However, warm weather limited gains for the week, combined with lockdown measures continuing to weigh on overall demand.
Day-Ahead power increased 2.8% to £29.80/MWh due to weak renewable generation and rises in coal and gas prices. Forecasts for this week indicate hotter weather and increased demand for electricity powered cooling.
Winter 2020/21 gas increased by 6.4% to 32.84p/therm following a rise in oil and coal prices. The International Energy Agency (IEA) also announced that it was increasing its energy demand forecast for 2020. However, gains were capped by concerns over a second wave of Covid-19 cases.
Several planned maintenance outages in Norway and the North Sea last week helped to limit UK gas oversupply. Up to three Qatari LNG tanker deliveries are expected this week.
The UK’s historic run of over two full months without coal for power generation ended this week. The coal-free period lasted 67 days, 22 hours and 55 minutes when the Drax power station in north Yorkshire performed maintenance on one of its coal units that incidentally added some power to the national grid.
Our recommendation remains to lock in contracts as soon as possible as prices begin to rise following the easing of lockdown restrictions.