UK Natural Gas prices finished the year well off their highs with a gain of just 5% on the year at 180 GBP/Thm at the end of 2022 and 77.5% off the highs in March. In an extremely volatile year that caused havoc on millions of British citizens and financial markets, after Russia’s invasion of Ukraine and the subsequent Western sanctions disrupted supplies to the European region. Natural gas prices in the UK are well below the intraday-record level of 800GBP/Thm hit on March 7th and a record closing high of 640GBP/Thm hit in August. The UK had milder weather than had been forecast, especially from the worst-case scenarios espoused August of this year.
Prices were able to fall back after the initial panic. The UK was able to obtain strong supplies and milder temperatures lowered demand. Wind and liquified natural gas supplies helped alleviate Russian gas supplies. Russian gas European imports are down by more than 80% compared to last year. The US agreed to increase natural gas exports to the UK as part of a joint effort to reduce costs and limit Russia’s impact on western energy supplies. Gas flows via Ukraine, the last route delivering Russian fuel to western Europe remain steady even after a Russian pipeline exploded.
Milder Weather than Forecast at Height of Panic
Britain’s wind farms generated a record amount of electricity
The UK wind conditions and turbines deployed at sea, where gusts tend to be stronger and more consistent have helped Britain’s wind farms produce nearly 74 terawatt hours by December, enough to power more than 19 million British homes, according to National Grid data. That exceeded the previous record of 68 terawatt hours set in 2020.
Next year the UK add another major wind farm with the 1.1-gigawatt Seagreen project from SSE Plc and TotalEnergies SE set to begin operating in the summer. Even with more capacity the wind doesn’t blow in freezing temperatures plants need to burn natural gas to plug the gap.
The EU has reached a deal to cap natural gas prices which would take effect if prices on the front-month Dutch Title Transfer Facility gas hub contract exceed €180/MWh for three days and will be applied from February 15th.
The lower prices have helped reduce inflation fears and taken some pressure off the Bank of England in raisng rates.
The devastating energy bills have seen public borrowing have a significant increase as the government spends more on support for households and businesses struggling with their energy bills. Inflation also pushes up debt interest costs.
The budget deficit is forecast to hit £177bn in the financial year to the end of March 2023, almost £40bn more than a year earlier, before then gradually falling over the next few years.
From The TradersCommunity Research Desk