Industry NewsUK energy transporter, National Grid, is expecting lower-than-average temperatures this winter and an increase in gas prices. However, it does not feel the expected price gains are fully a factor of weather related demand. Indeed, its scenarios point to a drop in overall gas demand as a result of lower generation requirements. National Grid expects gas prices to be supported as much by international factors as UK demand this winter.
National Grid has published its annual Winter Outlook report that provides its expectations for fundamentals for the coming season. It has indicated that forecasts point marginally towards a colder than normal winter. Despite this, it also forecasts a three to eight per cent drop in gas demand over the winter. This is linked to the expectation that coal will be a more popular fuel in electricity generation than gas. This is due to price differentials. The company specifically highlighted issues over gas availability in Europe caused by Germany's move away from nuclear energy, requiring it to use more gas-fired generation to fill the supply gap.
On the supply side, deliveries from the UK Continental Shelf (UKCS) are expected to continue falling as the assets mature. Year-on-year, National Grid is forecasting an eight per cent drop in UKCS flows. However, this is being mitigated by higher LNG deliveries as well as healthy gas stores. Indeed, additional storage assets are expected on-line shortly, improving overall supply security. However, the actual range of supplies from storage is expected to be marginally lower than last year, potentially as there may be less of a requirement for its flexibility.
The Winter Outlook can be found by clicking on the following link:
