The amount of natural gas used for power generation in the UK so far this month reached the highest cumulative amount for January since 2011 after gas- for-power demand neared a five-year high Monday, data from National Grid showed Tuesday.
Total gas-for-power demand so far this month rose above the 1 Bcm mark to 1.015 Bcm for the January 1-18 period, up almost 80% year on year and already nudging close to the 1.123 Bcm total for the whole of January 2015.
Gas-for-power demand hit 69.24 million cu m Monday as a combination of low renewable generation and falling temperatures led to an increased need for gas burn, allied to favorable generation spreads as the day-ahead baseload contract has been pushed to more than 12-month highs this week.
Moreover, with temperatures over the UK expected to hover 2-5 degrees Celsius below seasonal norms Tuesday-Thursday, and wind-power generation set to fall day on day to a mere 231 MW during peak hours Tuesday and 444 MW Wednesday, gas-for-power demand is set to remain robust in the short term.
STORAGE WITHDRAWALS COMPENSATE ON SPREADS
To cover for the hike in gas-for-power demand, storage withdrawals from UK gas storage facilities have picked up pace as NBP price spreads have become more favorable due to the strong spot price compared to the NBP prompt and curve, pulled lower by oil prices so far in 2016.
UK storage facilities have withdrawn a net 808 million cu m from stock since the beginning of the month, with net withdrawals peaking at 96.9 million cu m on Saturday -- the highest net withdrawal for a gas day since February 2013.
NBP price spreads have encouraged storage withdrawals in recent days as the day-ahead contract has been the most expensive NBP contract, and was assessed at a 1.025 pence/therm premium to February 16 on Monday, encouraging capacity holders to withdraw gas.
Moreover, with weak oil markets weighing on longer-term NBP contracts, the day-ahead Monday was assessed 4.10 p/th higher than the Summer 16 contract -- the day-ahead contract averaged a 1.430 p/th premium over the front-season contract in December, according to Platts price data.
However, the strong withdrawals have seen storage stocks fall rapidly mid -January, falling back below the five-year average and widening the annual gap with 2015 levels.
UK gas stocks ended Tuesday's gas day with 3.339 Bcm in stock, 44 million cu m lower than the five-year average and 222 million cu m shy of stocks at the same time in 2015.
