Wednesday, March 15, 2006

Price reduces demand ... a bit

That is not surprising. You would expect an increase in price to reduce demand. As a very rough estimate demand is down by about 10-20 million cubic metres as a result of the price going up by a factor of 4-5. (ie 400% increase in prices).

That is a reduction in demand of about 3-6%. When the market is as tight as it is then that is important, but the big question is whether it is enough. The CCGTs will have moved to dual shifting where they only cover the peaks in demand and possibly started going through their stocks of oil.

This demonstrates how unresponsive to the spot price short term demand is.

The weather forecasts for next week are cold as well. The North Atlantic Oscillation is negative.

The largest demand from the local delivery zones is 335 mcm (on 2nd February).
Average production from Beach and IOG over the last 7 days (from 2 days ago) is 295 mcm. Average imports via the interconnector have been 34 mcm. This gives a total of 329 mcm. If, therefore, we hit a really cold day next week we would need some gas from storage to even provide the LDZ gas requirements.

Still the situation will be clearer over the weekend. Current forecasts of tomorrows demand imply that tomorrow will be OK.


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