Business Outlook 2020 - Autumn Snapshot

BUSINESS OUTLOOK 2020: Autumn Snapshot

Oil and Gas Market Update continued

Gas Market The average day-ahead NBP gas price in the first 10 months of 2020 was 21.61 pence/ therm (p/th), marking an acceleration of the downward trend seen in recent years. This is 38 per cent lower than the average price for the same period last year (34.64p/ th), and the 2019 full-year average of 34.70p/th. This also represents a drop of almost two-thirds compared to the same period in 2018 (58.8p/th). At one point in late May this year, the day-ahead NBP price fell as low as 8.5p/th — the lowest real-terms price observed since 2002. There has, however, been an uptick in September and October, with prices climbing to their highest point for a year at more than 41p/th. This coincides with reduced Norwegian supply and increased domestic demand for power generation. As with Brent, the long-term NBP trend is being driven by persisting and significant oversupply in the market. UK gas demand fell by 16 per cent in Q2 compared with the same period in 2019, a record low for the quarter, as a result of lower demand due to lockdown measures, higher temperatures and record levels of power generation from wind. Alongside this, supply has remained strong, both from domestic sources and imports. LNG imports remain at record levels, up 30 per cent during January to July 2020 compared with the same period in 2019 — almost five times higher than the same period in 2018.

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NBP Day-Ahead Gas Price (Pence/Therm)

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Source: ICIS

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