S&P Global Platts: Export Cut, Heatwave sees UK Gas Price Fall in June

Month of Two Halves for Power as Renewables Boom then Bust

London - July 06, 2017

LONDON (July 6, 2017) – UK day-ahead natural gas wholesale prices fell heavily in June, dragged lower by IUK gas interconnector maintenance and reduced demand, but were bouncing back strongly early July, S&P Global Platts data showed.

For electricity June was a month of two halves, with UK day-ahead prices initially deflated by periods of exceptional solar and wind generation, only for the prompt to hit a six-month high June 23 on steeply reduced renewables and short-term calls on conventional generation.

Annual maintenance from June 14-28 on the IUK gas line saw daily flows to the Continent drop significantly, while end-user gas demand at home was down 11% to 3.68 Bcm in June.

Gas-for-power demand experienced the sharpest loss, down 18% year-on-year to its lowest level for a calendar month since December 2015. Local distribution gas demand was down 8%, driven lower by a week of very high temperatures from mid-June.

Injections into storage were predictably lower year-on-year due to the Rough outage, with operator Centrica announcing June 20 its intention to close the facility permanently.

Meanwhile UK gas production continues to post annual increases, climbing 14% in June to 3.07 Bcm, while imports from Norway fell 23% to 1.44 Bcm and LNG regasification was down 26% to 346 million cu m.

With export demand recovering into July, UK gas prices had risen above 38 p/th by July 4, S&P Global Platts data showed. The rebound is likely to be short-lived, however, with several potential LNG cargoes on the horizon and Norwegian flows poised to increase, according to analysts’ forecasts from S&P Global Platts.

UK power prices slumped in the first half of June in response to lower gas prices and record solar/wind production, which for one half hour period on June 7 met a full 50% of UK demand.

Day-ahead power fell to a nine-month low of £30.75/MWh June 15 as solar alone peaked above 7 GW, meeting around 20% of national demand. A week later, and the prompt had risen to a six-month high of £66/MWh on calm, cloudy conditions and increased gas-burn, underlining the value of flexible standby generation.

Platts UK Day-Ahead Power and Gas Assessments

Jun-17 May-17 MoM change Jun-16 YoY change
UK power (£MWh)
Day-ahead average
38.47 40.59 -5% 36.84 4%
UK gas (pence/therm)
Day-ahead average
34.83 39.24 -11% 35.56 2%

Source: S&P Global Platts

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