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Gas prices on the UK’s wholesale market remain supported by the risk posed by the continuing crisis in Ukraine, but potential gains are capped by reports that the start of the winter season will be mild.
The UK’s gas storage levels are at some of the highest they have ever been following the previous winter’s mild temperatures which reduced the need for gas-heating in homes at the beginning of this year.
In addition, reports showing another mild start to the winter mean the market could find itself oversupplied, UK traders told Utility Week.
The UK’s Met Office does not forecast a season ahead, but its three month outlook report stated that its latest predictions for UK-mean temperature favour above-average temperatures for September-October-November as a whole.
“Overall, the probability that the UK-mean temperature for September-October-November will fall into the warmest of our five categories is around 35 per cent and the probability of falling into the coldest of our five categories is between 10 and 15 per cent,” the report says.
In addition, energy market specialists at Platts have reported that the UK’s gas storage levels are currently the highest they have ever been.
A UK gas and power trader told Utility Week that there is a risk premium priced into the market due to a potential supply disruption of Russian gas to Europe via neighboring Ukraine, but that fundamentals are increasingly bearish.
“Fundamentally [the market is] weak apart from the Ukraine situation, but Ukraine is a mess that is going to drag on,” a UK trader said.
Gas for delivery in the fourth quarter of the year was trading at 56.35 pence per therm Tuesday afternoon.
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