U.K. natural gas had the worst weekly loss in more than four years as warmer-than-usual weather hit most of northern and central Europe, helping reduce demand for the fuel used in heating.
Front-month gas fell 0.3 percent today, paring its weekly decline to 7.7 percent, the biggest drop since November 2009, on the ICE Futures Europe exchange in London. Temperatures in the south of Britain this week were as much as 5 degrees Celsius (9 degrees Fahrenheit) higher than usual, while Germany was as much as 8 degrees above normal, Donald Keeney, a meteorologist at MDA Weather Services in Gaithersburg, Maryland, said by phone today.
Demand for the fuel in the U.K. fell 2.48 billion cubic meters in March, the biggest decline since December 2011, Energy Aspects Ltd. said in a report dated yesterday, citing data from National Grid Plc. (NG/) Usage dropped to the lowest since Oct. 31 three days ago. Storage units in the European Union were 45 percent full yesterday, compared with 22 percent a year earlier, data on the website of Gas Infrastructure Europe show.
“We’ve passed the peak in terms of gas demand,” Thierry Bros, an analyst at Societe Generale SA, said by phone from Paris today. “Demand is not there and I don’t think it will pick up” at current prices.
Front-month gas dropped as low as 47.7 pence a therm ($7.92 a million British thermal units) and closed at 48.46 pence in London. The contract lost 28 percent since Oct. 1, the first day of the winter heating season. Day-ahead gas rose 1.6 percent to 48.75 pence a therm, according to broker data compiled by Bloomberg.
Demand in the 24-hour period to 6 a.m. tomorrow will be 222 million cubic meters, according to National Grid. Supply will be 3.2 million cubic meters lower than demand in the period, grid data show. Flows from the South Hook liquefied natural gas terminal doubled this week to 35 million cubic meters a day today, with three tankers due to arrive in the U.K. by April 11. Norwegian supplies fell on output cuts.
“It was a week of very warm weather,” Kai Biermann, meteorologist at Deutscher Wetterdienst in Hamburg, said by phone. “But the weather situation will change for northwest Europe starting from today. It will be colder, with lots of moisture and lots of wind, especially in Germany.”
Warm weather will reduce gas demand in the Netherlands, Belgium and France by 9.5 billion cubic meters compared to a year earlier, Energy Aspects said in a separate report e-mailed today. Dutch demand will decline 4 percent during the summer as “large” coal plants are set to be commissioned, said Trevor Sikorski, an analyst at the London-based consultancy.
Russia raised the gas price for Ukraine 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 the nation. European shipments were disrupted at least twice since 2006 when Russia cut Ukraine’s supplies. U.K. gas jumped the most since September 2011 on March 3 after Russia’s invasion of Ukraine.
“Gazprom has every right to cut off gas supplies to force payment and, or invoke a prepayment clause in the supply contract, but has not done so thus far, out of concern for its own reputation as a reliable supplier to Europe,” Andrew Neff, an analyst for IHS Inc. in Moscow, said by e-mail today. “The good news is that we’re in April, not January, so demand is easing, and also that Europe is far better prepared than in 2009 to cope with a potential Russian supply outage.”
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