U.K. natural gas for day-ahead delivery fell for a ninth day, the longest losing streak since November 2008, as an outlook for warmer weather cut demand for the fuel used in heating.
The contract declined as much as 1.3 percent and was down 1 percent at 5:39 p.m. in London, according to broker data compiled by Bloomberg. Front-month gas on the ICE Futures Europe Exchange in London dropped as much as 1.3 percent to the lowest level since Nov. 15, 2010. The area from southern U.K. to the Alpine region will have temperatures as much as 8 degrees Celsius (14.4 degrees Fahrenheit) above average over the next five days, MDA Weather Services said in a report today.
Demand for the fuel in the U.K. yesterday reached the lowest level for a weekday since Oct. 31, according to National Grid Plc. Storage levels in the 28-member European Union were 46 percent full yesterday, compared with 24 percent a year earlier, according to data on the website of Gas Infrastructure Europe, a Brussels-based lobby group.
“The general picture continues with a lot of storage overhang and warm weather,” Frank van Doorn, head of gas trading at Vattenfall Energy Trading in Amsterdam, said by phone today. “The only question really is how much further can it fall?”
Day-ahead gas was at 48 pence a therm ($7.96 a million British thermal units), broker data show. Front-month gas dropped as low as 47.85 pence on ICE before closing at 48.6 pence a therm, taking this year’s decline to 29 percent.
Gas prices have been falling on “bearish news for the past four weeks in terms of demand, weather and the absence of any real supply problems,” van Doorn said.
Supplies from the South Hook liquefied natural gas terminal rose as high as 35 million cubic meters a day today, the most since November, grid data show, as three tankers are due to arrive at the facility in south Wales by April 11.
The U.K. plans to export 15 million cubic meters to Belgium today, which would be the highest since Oct. 4, according to data on the website of Interconnector (U.K.) Ltd., the pipeline linking the two countries.
Day-ahead gas rose as much as 1 percent intraday and front-month futures gained up to 1.1 percent as Brent crude, the benchmark for more than half the world’s oil, climbed from a five-month low and Russia increased gas prices to Ukraine, fueling speculation of disruptions in Europe. U.K. gas prices can be affected by pipeline imports from mainland Europe, which gets some of its gas under contracts linked to oil.
“Brent is up on a technical bounce after yesterday’s steep fall,” Carsten Fritsch, a commodities analyst at Commerzbank AG in Frankfurt, said by e-mail today. Russia’s price increase probably supported U.K. gas before it resumed its slide, he said.
Russia increased the gas price for Ukraine’s NAK Naftogaz Ukrainy by 81 percent in a two-step process this week after ending discounts provided in 2010 and last December. The moves raised prospects state-run OAO Gazprom (GAZP) may threaten to halt sales to Ukraine. European shipments were disrupted at least twice since 2006 when Russia cut Ukraine’s supplies during price disputes.
“The current risk of a new ‘gas war’ triggered by Naftogaz’s arrears may be overblown, but Europe’s continued dependence on Russian gas has once again put the issue of the continent’s energy supply security at the top of the agenda,” Andrew Neff, an analyst for IHS Inc., said by e-mail. “The reality is that there is no silver bullet solution for Europe’s dependence on Russian gas.”
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