With mild temperatures and imports of LNG at record levels gas prices to fall in the New Year?
With coal fired generation falling and soon to be phased out in the UK, gas fired generation will remain an important part of the energy mix. Gas generally provides between 30-60%`of UK electricity dependant on demand, wind/solar levels and nuclear availability. Gas price risks are also a concern for power markets, but it looks like wholesale gas prices could fall in the New Year.
There was a a big concern the trilateral gas talks between Russia and Ukraine, mediated by the EU would lead to rises. Around 30% of European gas supply comes from Russia via Ukraine, and the existing ten-year transit deal expires on 31 December. It seems now, however, that large imports of LNG from Russia, the USA and Qatar into the European market will see significant drop in the price of wholesale gas.
European gas storage is at record highs and supplies of LNG being plentiful. This trend is set to continue as the USA continues to export heavily as it seems to be on a competition with Russia over who can export the most.
Although the UK does not directly import Russian gas, our exposure to European gas markets could see us paying a premium come Brexit. Any gas price spike would inevitably feed into UK power prices.
LNG imports went up from 5m metric tonnes to over 12m tonnes in 2019. Qatar who has supplied the UK for a number of years, are the largest source followed by Russia and the USA.
If your energy contract expires in the next few months or worse still, you are out of contract, it will pay you to renew now to take advantage of falling prices or to protect yourself from any hikes after the 31st January 2020.
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