UK GAS Prices decline due to weaker demand and oversupply

• Milder weather has reduced heating demand and strong wind output is forecast which reduces demand from gas-to-power plants.
• Peak wind generation is forecast at around 13.4 gigawatts (GW) on Friday and Saturday, Elexon data shows.
• The day-ahead price was down 0.35 euro at 9.55 euros per megawatt hour, its lowest level since Oct. 2019.

LONDON: British wholesale gas prices declined on Friday morning due to weaker demand and oversupply.

The day-ahead contract was 0.25 pence lower at 24.50 pence per therm by 0854 GMT.

The weekend contract was down by 0.90 pence at 24.10 p/therm.

Milder weather has reduced heating demand and strong wind output is forecast which reduces demand from gas-to-power plants.

Storage levels are robust and liquefied natural gas send-out is also healthy.

After a record influx of liquefied natural gas (LNG) into Europe last year, the region is on track to raise imports close to 100 million tonnes this year.

The system was oversupplied by around 18 million cubic metres (mcm), with demand forecast at 222 mcm and flows at 240 mcm/day, National Grid data showed.

Peak wind generation is forecast at around 13.4 gigawatts (GW) on Friday and Saturday, Elexon data shows.

Strong wind output typically lowers demand for gas from power plants.

The February contract was down 0.65 p at 25.05 p/therm.

In the Dutch gas market, the month-ahead price touched its lowest level since June 2019 in early trade.

The day-ahead price was down 0.35 euro at 9.55 euros per megawatt hour, its lowest level since Oct. 2019.

Consultancy Energy Aspects expects the spread between Summer and Winter to widen over the rest of this quarter as summer prices continue to soften.

"Weak Asian gas demand through the rest of the winter will limit the region's summer restocking, pushing more cargoes to European ports," the analysts said.

"Mild early February weather could pare the European stockdraw, further curbing summer injections. Brisk production and high stocks are weighing on U.S. Henry Hub prices, and TTF prices will need to follow them down in order to discourage U.S. LNG supply once European coal-to-gas fuel switching is exhausted," they added.

The benchmark Dec-20 EU carbon contract inched down by 0.03 to 23.71 euros a tonne.