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UK gas prices lower on milder weather, LNG deliveries
April 9, 2013 / 10:08 AM / 5 years ago

UK gas prices lower on milder weather, LNG deliveries

* System 5 mcm long as storage sites start to fill up again

* LNG supply to offset looming storage, pipeline disruptions

* Prompt’s premium to May contract narrows further

LONDON, April 9 (Reuters) - British prompt gas prices lost ground on Tuesday as expected lower demand and milder weather would likely alleviate the impact of supply outages later this week, traders said.

The price of gas for Tuesday delivery fell to 72 pence per therm, down 1.30p from the end of trading on Monday, while the May contract traded 0.65p lower at 66.95p, further narrowing the gap between the two contracts as Britain moves into spring, when demand is more predictable.

Gas for immediate delivery fell 1 pence to 72.50 pence.

“We are seeing the end of the volatile trading conditions experienced in March, and the market looks a bit flat and lacking in volatility as weather gets warmer and demand falls back to the seasonal norm,” said one trader.

“The system looks relatively comfortable but if we see any additional outages to those already announced, there may be a need for more supply of gas from LNG terminals,” the trader added.

UK gas prices spiked towards record highs in recent weeks as abnormally cold weather, pipeline closures and production outages drained inventories and heightened fears of shortages.

But an increase in flows since the end of last week and recent deliveries of liquefied natural gas have taken some of the pressure off supply.

“We expect less need for storage withdrawals for day-ahead to balance, adding a bearish signal,” analysts at Reuters Point Carbon said in a daily report.

Traders said increased supply of LNG will mean Britain’s gas system is likely to deal with a shutdown of Rough - the country’s biggest storage facility - on Wednesday and Thursday, while Norway’s key gas processing plant Kollsnes will be out of action for 12 hours on Friday.

The South Hook LNG facility is likely to supply between 26-30 mcm a day for the remainder of the month, analysts said.

Three deliveries of LNG are expected at the terminal over the next week while another vessel, will likely arrive at the Isle of Grain on the 12 April.

Britain’s stored gas reserves increased 0.7 percent to 4.1 percent or 195 million cubic metres by late Monday, according to data from Gas Storage Europe, as supplies were pumped back into heavily-depleted storage sites.

The gas market was oversupplied by around 5 mcm this morning as demand was forecast at 280 mcm, compared with a seasonal norm of 262 mcm.

Requirements of gas are expected to ease later in the week as temperatures are forecast to rise towards a maximum of 15 degrees Celsius by the weekend.

“I’d expect to see demand to fall to 245-255 mcm in the second half of this week so the supply outage at Kollsnes is unlikely to have much of an impact on prices,” the trader added.

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