Energy Prices Drop Despite The Cold Weather

Despite going through one of the coldest winters in history, UK energy prices dropped. Strong gas supply from Norway, imported LNG and the restart of a nuclear reactor helped bring household and business energy prices down.

Normally when temperatures drop gas prices go up. This winter temperatures are several degrees below seasonal average which should have rocketed gas prices. Energy prices are highly influenced by gas prices, so every time gas prices go up energy prices soon follow.

“Everything has traded lower on gas,” said an energy broker.

Back in December we reported that UK Business Gas Prices Drop despite Forecasted Cold Spell, at the time a strong supply from Norway and Netherlands plus strong imports of LNG forced gas traders to lower their prices.

The same is happening again. National Grid data showed Norwegian gas via Langeled was flowing 69 mcm/day, while the Interconnector was adding 12mcm/day and Britain’s LNG terminals were supply around 90 mcm.

Gas prices for Wednesday dropped 60p for spot contracts compared to late December and were traded at 57.80 pence per therm. Gas for February and March was down 2 pence and was traded at 57.80 and 57.50, respectively.

In the power market energy prices followed and British baseload power prices for delivery on Wednesday was 49.85 pounds per megawatt-hour (MWh) and 55 pounds per MWh in peak, down GBP1.65 per MWh.

On the N2EX wholesale power exchange, the day-ahead power auction cleared GBP3.51 lower than the previous day at GBP48.65/MWh.

But gas wasn’t the only reason energy prices dropped. The restart of Oldbury 2 220 MW nuclear reactor and its reintegration to the grid also played an important role in plunging UK energy prices.

There are also energy brokers that believe floods in Australia might influence UK gas and energy prices if coal supply is interrupted. UK coal surplus is high which means it won’t affect prices just yet.

Further more, weekend base was heard at GBP48/MWh, down GBP3 from the previous weekend, and week 2 base was offered at GBP50.75/MWh.

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