The outlook for summer 2014 is a positive one with expected gas and power supply stability. The following is a summary of the forecasts:
- Oil – Slow downward trends throughout 2014, to below $105/bbl by the end of the year.
- Coal – Expected to remain fairly flat during the summer at around $75-$80/tonne, but increasing slightly for winter 2014.
- Gas – To remain fairly flat during the summer but increase for Winter 2014/15.
- Power – Closely following the UK gas prices.
Gas Supply and Demand
Fewer liquefied natural gas (LNG) cargoes are expected to be seen coming into the UK, in comparison to 2013 figures, due to Asian demand; namely from Japan, South Korea and increasingly China. Flows from the continent to the UK, via interconnectors, are expected to be similar to those seen in recent summers.
Gas demand for summer 2014 is expected to be above seasonal norms at 176mcm/d as a result of colder summer forecasts.
Potential Disruption to Russian Imports
National Grid predicts that there will not be any disruption to the exports of Russian gas to Europe. However, they continue to monitor the situation and assess what impact, if any, it could have on UK supplies.
Gas Storage
In comparison to 2013, demand for storage injection is much lower and relatively minimal, due to little need for storage over the winter.
Electricity Demand
Since 2006, the demand on the transmission system has consistently been dropping. This is partly due to embedded generation, including renewables and smaller scale conventional sources of generation. There have also been reductions in energy usage in view of energy efficiency measures and behavioural change, which will continue to increase year on year.
Generation Capacity
Expected generation capacity at the start of the summer is 76.4GW. The capacity could be less than this if more gas stations are mothballed during the summer.
Overall the UK can expect price and supply stability over the next few months, with the occasional spike deriving from trader sentiment over geo-political news in Ukraine. As we can see from the graph above, we are very much at the bottom of the market, providing an excellent buying opportunity.
