U.K. natural gas for summer declined for a sixth day to an 18-month low on expectations that warmer weather will reduce demand for injections of the heating fuel into storage.
Five of seven meteorologists expect most parts of Europe to be milder than normal this month, with warmer-than-average weather for a third month, according to a Bloomberg survey. Gas is typically injected in storage during the summer months, from April through October, when heating demand is low, and withdrawn in the winter period when demand increases. Storage levels across Europe were depleted last winter after a cold spike in February and March coincided with lower imports of liquefied natural gas and cuts in Norwegian pipeline supplies.
“Weakness at the prompt is just about another wet but ultimately mild week, meaning takes on storage are not going to be that high,” Trevor Sikorski, head of natural gas, coal and carbon at consultant Energy Aspects Ltd. in London, said by e-mail. “For the summer contracts, this does mean that the call on gas to be injected into storage will be less than last year. The less summer demand for gas to be injected into storage, the greater the pressure on gas to encourage demand from other sectors (power).”
The average temperature in the U.K. tomorrow is forecast at 4.9 degrees Celsius (41 degrees Fahrenheit), compared with the seasonal norm of 4.7 degrees, according to WSI data on Bloomberg using the ECMWF model. The low temperature in London on Feb. 6 will be 3.8 degrees Celsius, compared with the 10-year average of 3 degrees, according to CustomWeather data on Bloomberg.
U.K. storage is about 70.3 percent full, compared with about 55 percent a year earlier, according to data from Gas Infrastructure Europe.
Gas for within-day delivery declined 0.5 percent to a three-month low of 61 pence a therm, according to broker data compiled by Bloomberg. The front-month contract declined 0.8 percent to 60.65 pence a therm, the lowest since September 2012, according to ICE Futures Europe data on Bloomberg.
“At the month-ahead stage, it means that starting March, typically the last full withdrawal months, storage inventories are going to be very healthy and the supply side will be very comfortable, even if you get a couple weeks of cold weather,” Sikorski said. “The longer it is mild for, the less important weather risks become for that contract, as the storage levels suggest that you could take out very high weekly levels and there will still be inventories available.”
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