Gas prices increase as cold weather increases demand

Forecasts of cooler weather combined with bullish carbon futures put pressure on natural gas prices on Thursday.

The biggest gains were posted on prompt and near-curve contracts, with downward revisions to temperature forecasts in the afternoon helping to propel the December 23 front-month contract 0.26p/kWh higher when compared to its previous close.

According to our 14-day demand forecast, British gas demand is set to outturn significantly above seasonal norms until at least 7th December, coinciding with reports of a cold snap across much of Western Europe over the same period.

Contracts further out likely found support from gains posted on the carbon market, data from ICE shows that the Carbon EUA benchmark contract lifted 2% higher day-on-day.

In other news, UK energy regulator Ofgem yesterday confirmed that the Energy Price Cap will rise to £1,928 per annum for a typical UK household from 1st January, an increase of 5% or £94 when compared to the previous quarter.

Although contracts had initially opened in softer territory this morning, most are now heading back towards their previous settlement, at time of writing.

If we check the latest half hourly period at the time of writing (10:30 – 11.00), 44.30% (17.78 GW’s) of the UK’s total electricity (37.73 GW’s) is being generated from wind turbines at the moment with gas only having to contribute 5.00 GW’s (12.46%) of the total generation mix.

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