UK GAS Milder weather puts more pressure on prices

• The day-ahead contract was down 0.70 pence at 25.50 p/therm by 0930 GMT.
• Wind generation is robust, which usually tends to lead to a reduced gas-for-power demand.
• LNG send-out was at around 49 mcm on Thursday, compared to 72 mcm on Wednesday.

LONDON: British wholesale gas prices dropped on Thursday morning as milder weather reduced gas demand, putting pressure on the market which is generally oversupplied this winter.

The day-ahead contract was down 0.70 pence at 25.50 p/therm by 0930 GMT.

The within-day contract was yet to trade.

With temperatures getting milder, gas consumption has fallen and is expected to decrease further on Friday, Refinitiv data showed.

Average temperatures across the country are forecast at 8.4 degrees Celsius on Thursday, 3.2C warmer than previously expected. On Friday, temperatures are predicted to increase to 9.7C.

As a result, residential gas consumption is expected at 203 million cubic metres (mcm) on Thursday, 30 mcm down from an earlier forecast.

On Friday, a further drop in gas demand is expected.

Wind generation is robust, which usually tends to lead to a reduced gas-for-power demand.

Peak wind generation is forecast above 13 Gigawatts on Thursday and Friday out of 17.9 GW wind capacity, Elexon data showed.

Despite reduced gas consumption, UK gas system was slightly undersupplied on Thursday, with overall demand forecast at 251.4 mcm and supply at 248.2 mcm, National Grid data showed.

This was a result of lower gas flows from Norway and a drop in liquefied natural gas (LNG) send-out.

Imports from Norway were at 80 mcm, down by 11 mcm from the previous day, Gassco data showed.

LNG send-out was at around 49 mcm on Thursday, compared to 72 mcm on Wednesday.

Curve contracts are impacted by a number of cross-commodity and cross-sector factors, such as a falling LNG price in Asia, stock market drop caused by the coronavirus in China, and a falling carbon emissions price, a gas trader said.

The February contract was down 0.42p at 26.10 p/therm.

The day-ahead gas price at the Dutch TTF hub was down 0.41 euro at 9.82 euros per megawatt hour.

The benchmark Dec-20 EU carbon contract was down 0.15 euro at 23.84 euros per tonne.