UK Braces for Snow and Ice in Late-Winter Test for Energy Market

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(Bloomberg) — The UK is bracing for a blast of Arctic weather, boosting demand for natural gas and testing the country’s energy networks in the final weeks of winter.

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“Cold and wintry” conditions are forecast across the country over the coming days, the Met Office said in a statement. Snow and ice warnings are in effect for large parts of the UK — including London — in the early part of the week, and unusually low temperatures are expected through Friday. 

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The country’s forecast gas demand has risen about 4% since Friday, data from National Grid show. However, power and gas prices remain relatively unfazed for now. Gas storage levels on the continent remain higher than unusual and a pipeline incident over the weekend has kept more of the fuel in Britain than expected.

“With a little under a month left of winter, the upside demand risk from a prolonged spell of cold weather is diminishing,” Timera Energy said in a note. “Europe looks set to end winter with over 50% of gas in store even if March temperatures outturn below normal.”

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The UK lacks large gas storage sites, relying instead on a steady flow from its North Sea fields, Norway and liquefied natural gas from global plants.

Gas exports from Britain to mainland Europe halted over the weekend due to an equipment issue, meaning more fuel can remain in the country to meet elevated demand during the cold snap — even as some facilities that deliver gas to the UK are affected by outages. 

Exports Via Key UK-EU Gas Link Halted During Winter Cold Snap

Europe’s LNG imports also remain strong as the US is shipping a record amount of the fuel with the restart of the Freeport LNG plant in Texas.

Still, there’s a chance that gas networks in the region could be pressured in the coming days. Wind power generation in the UK is expected to fall over the next three days. Scotland could see temperatures as much as 7C below normal this week, while the northern tier of the continent is also set to be unseasonably cold, according to forecaster Maxar Technologies Ltd.

Elsewhere, strikes at Electricite de France’s hydropower units added a small strain to that country’s system. About 460 megawatts of capacity were unavailable on Monday morning, grid operator RTE said in a notice. The restriction on production is likely to continue through Tuesday.

Day-ahead gas prices in the UK slipped by 2.1% to 115.5 pence a therm by 11:14 a.m. local time. Front-month prices also declined. Benchmark front-month Dutch gas futures fell by 4.4%, while German month-ahead power fell by 3.6%. 

—With assistance from Todd Gillespie.