Wholesale gas prices rise 12% in November

A prolonged cold snap could destabilise wholesale gas prices
A prolonged cold snap could destabilise wholesale gas prices

Wholesale gas prices increased 12% on average so far in November compared to last month, according to the latest Wholesale Energy Market Report published by Vayu Energy.

The average wholesale gas price is up 34% this month compared to November 2015. Increased demand from mainland Europe and limited LNG (liquefied natural gas) supply during October and November led to the higher prices.

The average day-ahead price for gas, the contract for gas delivery tomorrow, is 48 p/th (pence per therm) for November so far. This compares with an average price of 36.01p/th in November 2015.

Total gas in storage in the UK remains at around 52%. British utility Centrica announced earlier in the month that there would be a further delay to the restart of its Rough gas storage site.

Two thirds of the site’s capacity was expected to come back online on November 1.

However, the company said it was still conducting preparatory works and reinstatement testing to enable gas withdrawals from the facility. Restart is now expected at some stage later in November.

The extended restart raises the prospect of higher gas prices during the winter period. The Rough facility usually meets around 10% of demand during winter.

Commenting on the outlook ahead, Joanne Daly, Senior Energy Analyst at Vayu Energy said: “After just 1 LNG cargo arrived into the UK during October, three are scheduled for November delivery which should bolster LNG send-out.

“Although these numbers are an improvement on that seen in October, LNG deliveries will have to increase further in order to put significant downward pressure on prices.

“Looking further ahead into 2017, traders have noted there is a lot of uncertainty around available supply at the start of next year. If temperatures remain around seasonal norms, the outlook is relatively stable.

“However, higher than expected demand, coupled with continuing low LNG deliveries could hold up prices during Q1.

“The trend of low LNG deliveries could continue because, with many other gas markets indexed to NPB, LNG sellers can sometimes starve the UK of LNG in order to elevate prices, which in turn elevates the price that buyers of LNG are willing to pay in these other markets.”