The power system has tightened due to continued nuclear outages and muted wind generation.
That’s according to Inenco’s Y report, which adds French nuclear outages have resulted in continued exports from the UK, reaching as high as 2GW. This is adding further tightness to the UK system and driving prices higher.
The gas market started very oversupplied this week due to warmer temperatures and LNG deliveries at South Hook. As the week continues, both temperatures and LNG send-out are falling.
Oil prices fell to around $45/bbl (£36.24/bbl) at the end of last week due to the US rig count increasing by nine to 450 but have since recovered slightly due to OPEC reasserting the terms of proposed production cuts. A meeting at the end of the month is expected to give more clarity.
The tight system meant day-ahead power prices were trading very high at the start of this week at £150/MWh.
Day-ahead gas prices are at two-year highs despite initial oversupply.
Energy Trader Dorian Lucas said: “Customers looking to place fixed price contracts should do so ASAP. The recent downturn in prices that we saw at the end of last week represents opportunities to potentially secure a slightly better price.
“With regards to customers with flexible contracts, it’s down to attitude to risk. At the moment we are very much in an uptrend so I’d recommend having as high a hedge across your supply agreement as possible. Where you’re not in supply agreement for the next two, three or four years, very much look at extending with your incumbent or running a fresh tender to make sure you are in a supply agreement.”