Market down despite elevated demand in power sector

The market resumed a downward trajectory on Wednesday despite elevated demand from the power sector.

Cooling geopolitical tensions continued to help reduce pressure on the curve. Reports that Oman had opened a temporary toll-free shipping route for vessels wishing to exit the Persian Gulf via Hormuz, stood out, as it demonstrated collaborative efforts from a regional player to clear the massive backlog of cargoes, some of which have been trapped in the area for nearly four months.

The width of the Strait of Hormuz is comprised of overlapping territorial waters of both Oman and Iran and the two countries are in talks to charge a toll for passage, reportedly to be implemented in the near-future. The Strait is also undergoing de-mining, a key stipulation of the US-Iran peace plan.

Baseload power prices eased lower alongside natural gas on Wednesday, despite above average system demand and persistently low wind output.

Gas fired-power generation averaged at a rate of 14.4GW, meeting approximately 41% of overall demand, wind met just 10% over the same period.

At around 07:10, system operator NESO issued an Electricity Margin Notice, requesting that idle CCGT units fire up in anticipation of a forecasted surge in demand between 19:00 and 22:00 hrs.

This prompted a spike in system balancing prices, with the operator paying more to incentivise generation.

NESO also executed a SO-SO trade with France’s RTE as a shortfall was expected overnight, this type of expensive trade is used to facilitate short-notice (urgent) interconnector flows and they should only be used when the system operator has insufficient resources domestically to meet the shortfall.

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Price commentary courtesy of Crown Gas and Power