Cold temperatures drive gas prices – DMR

Contracts in the gas market are up on the previous close, with prices in the power market looking likely to follow. This is supported by cold temperatures and increased seasonal demand, according to […]

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By Jonny Bairstow

Contracts in the gas market are up on the previous close, with prices in the power market looking likely to follow.

This is supported by cold temperatures and increased seasonal demand, according to npower’s daily market report.

The gas system is forecast to end the day 27mcm long, with prices being supported by limited storage withdrawal and LNG send-out.

Temperatures are currently just above 2°C and are likely to drop further mid-week. Current UK demand is already more than 40mcm above seasonal averages, putting further pressure on the system.

 

Sam Hill from the Optimisation Desk said: “Peak power margins today are looking tighter than they have previously this winter period, just over 7GW – driven by the colder temperatures.

“Wind generation is currently just above 4GW and is likely to drop throughout the day, lending to the requirements for less efficient coal generation which is just below 6GW. CCGT generation is a touch over 20GW, making up around 50% of the stack.”

Oil prices are trading down, currently at $46.22/bbl (£37.22/bbl). An OPEC production freeze looks unlikely and there is currently no upside risk priced in due to strong oversupply in the market, he adds.

The pound is trading against the euro at €1.12.