Record low gas prices continue to impact power
Business Energy Market Brief - Apr16
Despite a small recovery in oil prices, UK seasonal gas contracts continued to fall in March. Most seasonal electricity prices also declined, while day-ahead power prices were higher.
Seasonal gas contracts remained at their lowest levels since 2007, as a strong UK gas supply outlook offset rising oil prices. LNG supplies to the UK were at a five-year high early in the month, weighing on prices. Import levels were low in the latter stages of the month, but this drop in supply was offset by higher withdrawals from comfortable UK storage stocks. UK gas storage facilities are currently 26% full, compared with 19% at the same point last year.
Seasonal power contracts were mixed despite the rise in gas prices. Summer 16 power gained 0.4% to £31.6/MWh while winter 16 power dropped 0.7% to £37.6/MWh. The rise in winter 16 power came despite tightening capacity margin forecasts for next winter as a result of a number of coal-fired power stations having closed or being scheduled to close.
Spot power prices were higher in March. Day-ahead power gained 1.1% to average £34.3/MWh. The contract rose as lower wind output, which fell 65% in the month, outweighed falling electricity demand. Day-ahead gas was down 0.5% to 29.6p/th.