Norwegian flows making up 74% of gas supply
UK gas and power prices are yet to trade but higher demand for gas is likely to support prices on the prompt, with bids onscreen in NBP DA contract in excess of 33p/th. Weaker commodities may cap any upside gains further down the curve, with movements in carbon likely to drive volatility for UK power.
· High demand for natural gas
· Storage levels drop lower ahead of winter
· Underlying commodities remain bearish
The UK gas system is forecast to close short today as temperatures dip below seasonal average level. Latest temperature runs show that temperatures will be colder for the next two weeks. Storage stocks for both MRS and LNG have dipped lower compared to storage levels seen this time last year. Therefore we are utilising some of the system flexibility we will need for colder months already. We have strong Norwegian flows providing 74% of the gas, followed by LNG making up a further 16%. However ongoing maintenance work continues to cause some restrictions to supply. The UK is not expecting to receive any LNG tankers this week, therefore LNG send out is likely to remain low. Three tankers that are now scheduled for delivery next week instead.
Power demand has increased to 33.6GW in total as temperatures dip lower. We currently have 19.7GW of CCGT generation online and 5.8GW of nuclear generation. Wind output is average at 4.3GW today as is expected to remain at circa 4GW all day. Wind generation is forecast to be poor tomorrow, therefore we are likely to see strong support in day ahead prices. Power imports from France are being offset by exports via the NEMO interconnector. Coal generation continues to remain offline despite a rise in power demand.
Carbon prices have opened firmer after coming under pressure late last week, with the December 20 contract at €26.35e/tCO2e. Stronger auction volumes may cap any further upside, with 19.7m EUAs expected to enter the market via auctions this week. Brent crude has opened softer trading at $41.64/bbl as the rise in coronavirus cases and rising Chinese stockpiles weighs on hopes of a demand recovery. At present oil markets look to continue to trade sideways with OPEC+ continuing to ensure their production levels keep Brent above $40/bbl, however higher crude output from Iran and Libya may provide some risk to this level.