Prices maintain upward trajectory as cold snap bites

Prices maintained an upward trajectory on Wednesday, with the current Europe-wide cold snap serving to tighten the British supply and demand balance.

Norway-UK flows decreased by 12% when compared to Tuesday’s gas-day as Norway opted to reroute additional supply to Continental Europe which is currently seeing a rapid rate of storage withdrawal.

Despite a drop in flows from North Sea production, the UK was slightly oversupplied throughout the session, with exceptionally high levels of LNG for now filling in supply gaps.

However, UK storage has been drawn down heavily in recent days and now sits roughly 50% below levels recorded at the same point last year, underscoring the fragility of the system should cold conditions persist.

Tight capacity fundamentals continued to serve as a prime source of support on Wednesday.

Imports via the UK’s cross-border interconnectors remained relatively low, though French demand appeared to be easing, giving way to more export availability to balance out fluctuating renewable generation in neighbouring countries.

The UK market has seen a huge spike in daily balancing costs over the past few days on the back of lower imports, which is likely adding underlying support to the prompt and near-curve.

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Price commentary courtesy of Crown Gas and Power