Storage renewable outputs and high gas storage levels continue

Head of Sales Trading, Fanos Shiamishis reports on the energy market activity, covering the period 8th – 15th November 2022. On our end of day pricing tool, the Source, we published an in week high of £257/MWh for the Summer-23 seasonal power price on 8th November with the price decreasing to £250/MWh yesterday. In this blog Fanos shares the market news and updates from the last week. 

Last week saw reduced UK Continental Shelf (UKCS) oil and gas production leading to prompt National Balancing Point (NBP) as the UK gas system fell slightly short. The wider European gas complex also rose on doubts the EU commission would endorse a proposed cap on gas prices. EU gas demand fell 25% in October compared to the last 2 years’ average for the same period, with Germany, Italy and France leading the way with the biggest drops.

UK gas and power prices softened further with strong renewable output, high storage levels, reduced demand and ample LNG supply. European Commission President, Ursula von der Leyen, announced more measures to promote renewable power projects and warned about risks the EU is facing with filling storage next summer.

Overall UKCS receipts increased by 15mcm/day following the resolution of unscheduled terminal restrictions and higher flows via Norway from the Langeled pipeline. Demand forecasts were lower day on day, whilst strong wind forecasts continued to curb gas demand for generation. Meanwhile, in Europe, Russian imports remained strong at Velke Kapusany.

The European Commission will propose a gas price ‘correction mechanism’ to member states. The measure is being introduced to ease price spikes but not the firm price cap favoured by some nations.

At the end of last week, UK and European gas priced reduced as mild weather continued with Germany expecting heating demand to remain curbed until the end of the month. However, weather models currently suggest a risk of colder conditions for early December.

UK LNG remains strong (80mcm/day) as Norwegian flows reduced due to an unplanned outage at the Oseberg oil field and to make space for the many LNG vessels UK-bound. The German energy network agency, BNetzA warned that the grid operators will need to remodel the pipeline infrastructure to enable big LNG import to replace the usual Russian gas supplies.

There was also an outage at Norwegian gas platform, Aasgard B, due to fire which elevated gas prices yesterday with Dec 22 NBP gaining the most as it is highly driven by weather updates and outages. The latest meteorological forecasts indicate a high chance of a cold snap in December with low wind. If we see significant withdrawal from gas storage in December it may trigger price gains across out to the following winter.