Warm weather and high wind cause Day-ahead to crash

Source: Heren

2018/10/11

Outlook

Wind generation to remain high for Friday and Saturday

Temperatures to return to average at the start of week 42

Oil losses influencing far curve similar to Oct 2017


LONDON (ICIS)--The NBP Day-ahead plummeted during Thursday’s session, recording its largest day-on-day loss since 16 March.

The product lost 2.75p/th by mid-afternoon but a large sell-off towards the close meant the contract shed a further 2.4p/th during the last two hours of the session. The contract has lost almost 10p/th since the start of the quarter.

Mild temperatures combined with high renewable generation and a weak energy complex has been driving the gas curve down since the start of the week.

According to National Grid, the system was oversupplied during the morning, with demand forecast recorded at 170mcm and flows at 172mcm/day. Demand forecast was revised lower intra-day before climbing again towards the end of the afternoon but the system remained long.

Average wind generation climbed above 9GW on Thursday, and during certain periods of the session was accounting for 30% of the power generation mix. Wind generation is anticipated to be as strong for Friday and Saturday before falling considerably on 14 October, data from National grid showed.

An unplanned outage at the SEGAL pipeline ended on Thursday morning, which allowed higher volumes to be delivered into Britain, which was reflected in the uptick of volumes entering the system via the St Fergus gas terminal.

The wider energy complex did little to stop the bears with considerable losses recorded on Brent.

Oil was trading at $80.75/bbl, 2.75% lower day-on-day and marked a new two-week low which pressured contracts further out on the curve lower.

The European coal market trading on the ICE exchange was dealing at around 0.50% lower day on day with carbon moving sideways for much of the session but did climb later in the day.

“A very similar downside took place last year in October when the curve tracked losses in oil,” a trader told ICIS.

An updated weather forecast provided by meteorologist WSI, showed that temperatures are to remain around 2-4°C above the seasonal norm but is looking like it will fall back nearer to average going into week 42.