Rising temperatures weigh on demand – Y Report

Temperatures have been above seasonal normal levels this week, which is likely to lead to a decrease in demand and a fall in day-ahead prices. An LNG cargo set to arrive […]

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By Jonny Bairstow

Temperatures have been above seasonal normal levels this week, which is likely to lead to a decrease in demand and a fall in day-ahead prices.

An LNG cargo set to arrive at the Isle of Grain in the middle of the week will provide some much-needed support to the gas system as storage levels are currently lower than they have been in years, according to Inenco’s Y Report.

The IFA connector, which has been operating at 50% capacity since it was damaged since earlier this winter, is now 75% operational. It is set to be at full capacity by the end of February.

 

Coal prices are increasing off the back of Chinese suggestions it will reintroduce daily output limits. This is likely to add volatility to the market.

Wind generation is strong at 8GW, which is around 90% of the UK’s total wind capacity. This extra supply is likely to weigh on day-ahead prices.

Energy Trader Sam Sinclair said: “The upside risks at the moment, we feel, outweigh the downside potential. For that reason, we’d advise those looking to place fixed-term contracts to do so as soon as possible.

“For flexible clients, it might be an idea to just hold off a bit in terms of summer 2017 for you because there may be a better price to achieve. In terms of winter again, the risks are now mounting and it may be worth taking some heavy cover for that period.”