Weekly market update - Recent Developments in the UK Gas Market: Shortages, Disruptions, and Trading Trends

Head of Sales Trading, Fanos Shiamishis, reports on energy market activity, covering the period 1st – 7th August 2023. On our end-of-day pricing tool, The Source, we published an in-week high of £116.58/MWh for the Winter-23 seasonal power price on 3rd August. In this blog, Fanos shares the market news and updates from the last week.

On the morning of 1st August, there was a shortage in the UK gas system. The flow of gas from Norway was reduced due to maintenance activities at Kollsnes to Troll pipeline. Wood Mackenzie reported that further maintenance projects are planned for Norwegian gas assets in August and September. The UK power curve saw extremely limited trading activity throughout the day, with the majority of seasonal volume trading occurring after 4 PM.

Continental gas experienced a rebound following an unexpected disruption at the Troll gas field. The UK power market trading remained relatively steady, moving sideways, as carbon prices faced renewed downward pressure.

The front month had gained value due to a decrease in Norwegian gas flow, while the remaining part of the curve was trading sideways. On Thursday morning, there was a shortage in the UK gas system, attributed to increased demand for gas in power generation due to reduced renewable energy output.

European LNG delivered ex-ship is now on par with TTF as regasification terminals struggle to compete for deliveries with Asia. The price for LNG delivered to Europe in September has been evaluated at a 6% rise from the previous week and the highest since early July. Reuters explained that the narrow gap between TTF and LNG landing prices occurred because the current arbitrage opportunity is more favourable for Asia. September and October have become preferred destinations for deliveries to Asia, but as we move into the later part of winter, Europe offers the most beneficial profit margin. On Friday the UK gas system began the day with a 3mcm shortage, as the first LNG vessel for the past two months arrived at the Isle of Grain recently.

Yesterday morning, the UK gas system had an excess supply. Norwegian nominations have risen, leading to an increase in UK LNG sendouts. The spot price of LNG is easing due to reduced demand. The UK power curve displayed minimal trading activity, with 1MW of September-23 trading occurring after 4 PM. Overall, less than 110MW of seasonal volume was exchanged throughout the day.