Colder weather, reduced liquefied natural gas (LNG) send-out from terminals into the U.K. gas network and an escalation in the Ukraine/Russia conflict lifted European natural gas prices in late August while day-ahead electricity price trends diverged, according to data just released by Platts, a leading global energy, petrochemicals and metals information provider.

"U.K. spot natural gas prices briefly dipped under 35 pence per therm (p/th) in mid-July, but rose 8% month over month in August to an average 40.60 p/th on the back of cool temperatures and lower LNG supply," said Platts energy analyst Alex Froley.

Prices of day-ahead natural gas at continental Europe's most liquid natural gas trading hub – the Dutch TTF – rose 6% last month.

On the back of higher natural gas prices and unexpected outages at EDF Energy's Heysham and Hartlepool nuclear power plants, U.K. day-ahead power prices in August rose 6% from July.

The Netherlands also saw an increase in the day-ahead power price, up 10% month over month to Eur37.94 per megawatt hour (/MWh).

However, natural gas played a much lesser role in French and German power markets, where strong nuclear, hydro and renewables generation in August drove the Platts Continental Power (CONTI) Index* down 6.36% month over month to Eur27.54/MWh.

This marked the eighth consecutive monthly decline in the CONTI index, which was last seen at current levels in August, 2007.

"The divergence in power price trends illustrates differing national generation portfolios," said Platts Managing Editor Andreas Franke. "European spot gas prices hit a near-four month high September 1, pushing power prices up 12% in the U.K., where the price-determining production unit is usually gas-fired. German power prices, however, actually fell that day on the back of rising wind and solar output."

German wind power output in August rose 41% year over year to 3.33 terawatt hours (TWh), the highest monthly output since May as ex-hurricane Bertha brought unseasonably strong winds into the region, according to data from Platts PowerVision, a web-based energy analytics tool. Combined German wind and solar output in August was up 11% year over year at 7.22 TWh.

In France, day-ahead power prices sank to Eur21.92/MWh in August, down 36% on August, 2013, with nuclear production up 3.7% at 31.1 TWh and hydro up 22% at 5.1 TWh year over year.

On the demand front, daily average European gas needs in August fell 6% from the preceding month, dropping to 404 million cubic meters per day (cu m/d) from 430 million cu m/d in July. This was less than the 11% decline from July to August in the previous year.

"A decline in consumption from July to August might be expected because of holidays in much of Europe in August," said Franke, "which could reduce both gas and power demand, and therefore gas-to-power demand, from consumers."

"Local grid demand for heating picked up to 60 million cu m/d from 53 million cu m/d in July, while by the end of the month Qatari LNG send-out had dropped to 30 million cu m/d from an average 44 million cu m/d the month before," added Froley. "Norway also entered the heaviest period of its annual summer maintenance. The market has remained strong in September, breaking through 50 p/th for the first time since mid-April."

*Platts Continental Power Index (CONTI) is a demand-weighted baseload average of day-ahead contracts assessed in Germany, Switzerland, France, Belgium and the Netherlands. The Platts U.K. assessments reflect day-ahead contracts assessed for firm delivery of power on the high voltage network of England, Wales and Scotland, and at the National Balancing Point (NBP) for gas. The Platts assessments reflect prices as determined between buyer and seller in the open physical markets.
Source: Platts