Wholesale gas prices rose in November as the LNG send-out decreased significantly following a strong supply in October. Only one cargo has so far been confirmed for November, which has added to the bullish sentiment. As Rough gas storage is only partially operational, LNG cargos are expected to play an important role in supplying Britain with gas this winter. Natural gas has rallied further after ASN, the French nuclear authority, has required EDF to take a section of the French nuclear fleet offline for safety investigation. This has in effect decreased the import of power via the IFA interconnector. To compensate for that, CCGTs have been running more than expected which has increased the demand for gas. A weaker pound has also made the import of fuels more expensive, namely coal and LNG which are traded in US dollars. Natural gas also drew some bullish sentiment from the oil markets, but this effect was short-lived.
UK power prices have risen significantly in November due to several bullish factors. One of them was the growing fears that the UK will not be able to rely on regular power supply from France over the coming months after EDF was forced to take several nuclear reactors offline for safety checks. Generally, the UK tends to import some of its power requirements from the continent via the IFA interconnector during cold periods of the year. At the same time, fears for short-term supply were increased as the interconnector went through a maintenance period for most of October. Peak load contracts for the winter period took some price direction from the strength in the coal market, especially as coal is expected to play an important role in the UK’s generation mix during periods of high demand and also as cover for supply shortfalls when renewable output is low. A weaker sterling has effectively lifted the cost of importing fuels and power to the UK. The power contracts have also drawn some bullishness from the gas curve, which rose due to a weak LNG outlook in November.
Iain McCulloch
Power Solutions
The post November 2016 Energy Market Review appeared first on Power Solutions UK.
