“Bearish” mood continues in UK gas contracts

Gas prices for July slipped upwards in the UK this morning as the “bearish” mood tides over from last week, according to a daily market report. Tim Carter, Client Portfolio […]

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By Vicky Ellis
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Gas prices for July slipped upwards in the UK this morning as the “bearish” mood tides over from last week, according to a daily market report.

Tim Carter, Client Portfolio Manager at npower’s Optimisation Desk said: “Prompt gas contracts have continued last week’s bearish trends as July 14 contracts are now trading 1pence per therm below Friday’s close at 38.6p per therm.”

However prices are low enough that power generation is dominated by efficient CCGT gas turbines, he said, “due to the cheaper gas prices, as more marginal plants come online.

“As such 44% of the generation this morning is from gas while coal stations are making up just 19%.”

This “fuel switching” is why CCGT demand is “strong” today, said the analyst.

On the other hand, higher temperatures may see lower “LDZ demand” – that is from local distribution zones, i.e. the smaller pipes supplying residential gas needs rather than large power plants. But this isn’t a “significant factor” in prices, he said.