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Prices rise as cold weather, low wind boost demand

Friday, 02 December 2022 | 01:00

British and Dutch gas contracts rose on Thursday morning as low wind generation kept gas-fired power generation at high levels and cold weather raised demand for heating, but analysts expect to see profit taking following recent bullishness.

Front month contracts have moved deeper into winter delivery. The Dutch benchmark contract for January TRNLTTFMc1 rose by 12.75 euros to 157.75 euros per megawatt/hour (EUR/MWh) by 0920 GMT, Refinitiv Eikon data showed. The contract for February delivery TRNLTTFMc2 was up 12.30 euros at 158.05 EUR/MWh.

The British front-month contract was up 31 pence at 400 pence per therm, according to Refinitiv Eikon data while the day-ahead contract rose by 50 pence to 375 p/therm.

“January remains a focal point of concern when it comes to cold temperatures and potential tightness around the supply/demand balance and is now the front month delivery contract,” consultancy Auxilione said in a market update.

Analysts at Engie’s EnergyScan said that profit taking by financial participants could pull prices lower during the day.

In addition, the strong flow of liquefied natural gas (LNG) and strong Norwegian imports are expected to provide support for a bearish outlook, said Refinitiv analyst Yuriy Onyshkiv.

The head of French energy regulator RTE said on Thursday that France is gearing up for a “tight” power supply situation but will not necessarily face cuts this winter.

However, Onyshkiv said that the French nuclear capacity forecast recovery could provide further softness to gas prices if the upward capacity trajectory continues over the next few days.

European gas inventories were around 93.19% full, compared to a peak of 95% in mid-November.

Britain’s gas market was 3.2 million cubic metres (mcm) oversupplied on Thursday morning, with demand expected at around 343.5 mcm and supply forecast at around 346.7 mcm, National Grid data showed.

Peak wind generation was expected at around 3.2 gigawatts (GW) on Thursday and 8.2 GW on Friday, out of a total metered capacity of more than 22 GW, Elexon data showed.

Eastbound gas flows through the Yamal-Europe pipeline to Poland from Germany rose slightly on Thursday morning, while Russian supplies to Europe via Ukraine were lower.

In the European carbon market, the benchmark contract CFI2Zc1 was up 1.33 euro at 72.65 euros a tonne.
Source: Reuters (Reporting by Marwa Rashad; editing by Kirsten Donovan)

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