LONDON: British prompt gas prices retreated yesterday as surging supplies and warming weather alleviated concerns that abnormally high demand would empty the last of reserves in storage.
The price of gas for yesterday’s delivery slid 6 percent to 75 pence per therm, moving closer to the May gas contract at 67.50 pence, which reflects more typical prices for the time of year.
UK gas prices spiked towards record highs in recent weeks as abnormally cold weather, pipeline closures and production outages rapidly depleted inventories and stirred fears of a gas supply crunch. Liquefied natural gas (LNG) imports from Qatar, Algeria and Trinidad and increased pipeline flows from Norway have allayed those concerns, driving prices lower across the board as the coldest March in half a century gives way to milder April temperatures.
Algeria and Qatar are both sending fresh shipments of LNG to UK ports due to arrive this week, while Belgium’s Zeebrugge terminal expects another three tankers between now and April 20. Britain’s stored reserves continued to drop, with the last measurements on Sunday indicating sites were just 3.36 percent full, although the rate of decline has slowed down somewhat in recent days.
Inventories at Britain’s biggest such facility, Rough, ran down to 7 mcm below its advertised minimum capacity yesterday, analysts said, although the site is understood to contain around 100 mcm of additional supply. Operator Centrica last week said it planned to take Rough storage offline for maintenance tomorrow and on Thursday, preventing gas withdrawals from the site.
Another smaller storage site at Humbly Grove was hit by an unplanned outage on Monday, operator Petronas Energy Trading said. “There’s still some gas in Rough, the weather is getting warmer, we’re getting very good flows from Norway, and with the all the LNG that’s on the horizon now, people are getting more comfortable,” a trader with a European utility said.
Storage levels should also improve from next week when warmer weather and lower gas prices will prompt re-injection into various sites, he said.
Gas for immediate delivery fell 5.25 pence to 75 pence.
Further along the curve, the benchmark winter 2013 gas contract shed 0.33 pence to 73.44 pence, reflecting increasingly bearish prompt market sentiment. The gas market was oversupplied by around 27 mcm as demand at 281 mcm aligned more closely with seasonal norms.
In its April 12-21 weather forecast, Britain’s Met Office said: “By the end of the period, southern and eastern areas are likely to turn rather sunnier, and it may also turn warmer at times inland.”
Reuters
