U.K. Gas Extends Gains Amid Freezing Weather; Power Advances

U.K. natural gas extended gains as National Grid Plc forecast the highest usage in almost a year amid freezing weather prompted and a pipeline halted flows. Next-day power climbed.

National Grid forecast demand may rise 4.5 percent to 457 million cubic meters by 6 a.m. London time tomorrow, 109 million more than normal for the time of year. That would be the most since January.

Gas for next month rose 1.95 pence, or 3.6 percent, to 56.2 pence a therm, its highest since Feb. 10, 2009, according to broker data on Bloomberg at 4:45 p.m in London. That’s equal to $8.76 a million British thermal units. A therm is 100,000 Btus.

Interconnector (U.K.) Ltd.’s reversible natural gas pipeline between Britain and Belgium halted flows into Britain at about 5.30 a.m., grid data show. The pipeline was importing as much as 34 million cubic meters a day earlier today.

“There are no operational problems” on the link, Darren Reeve, London-based commercial manager at Interconnector, said in a telephone interview today. “We’re flowing to the customer daily nominations,” he said.

London temperatures may decline as low as minus 6 degrees Celsius (21 degrees Fahrenheit) on Dec. 3 from today’s minus 5 degrees, according to CustomWeather Inc. data. Gas is used to heat about 80 percent of the country’s homes and businesses and is used to generate about half of Britain’s electricity supply.

U.K. baseload power for the next working day gained 16 pounds, or 29 percent, to 71 pounds ($111) a megawatt-hour. The contract earlier advanced to 74 pounds, its highest price since January 2009, broker data show. Baseload power is delivered around the clock.

Electricity ‘Stresses’

Britain gets about 80 percent of its power from coal- and natural gas-fed power stations and some utilities can switch between the two depending on prices. Higher gas prices, spurred by greater demand for heating, can mean that gas plants switch off and more coal units are started.

“Stresses are apparent” in the electricity market “given the extent of generating plant outages and export demand through the U.K.-France interconnector,” Craig Lowrey, an Ipswich, England-based consultant at J.C. Rathbone Associates Ltd., said in an e-mail. The U.K. is connected to France via a 2,000-megawatt cable and power usually flows to the higher priced market.

Gas Reserves

Colder-than-usual weather has depleted gas inventories to their lowest level at this point in the winter for five years. Stockpiles at Rough, the country’s largest facility, fell to 31,271 gigawatt-hours yesterday, 19 percent less than a year ago, according to National Grid data.

“The storage situation remains a key uncertainty,” Lowrey said. “Obviously we had the withdrawals in late October and at the time participants probably thought they could re-inject in November, which they have now not been given the chance to do.”

Natural gas for today gained 5.9 percent to 62.5 pence a therm while fuel for the first quarter of 2011 rose 3.4 percent to 56.2 pence a therm. Power for the first three months of next year advanced 2.6 percent to 49.75 pounds a megawatt hour.

The Isle of Grain liquefied natural gas terminal near London completed its third-phase expansion today, increasing its capacity to 14.8 million metric tons of LNG a year, or about 20 percent of Britain’s annual gas demand, National Grid said in an e-mailed statement.

Bloomberg compiles prices from brokers including ICAP Plc, GFI Group Inc. and Spectron Group Ltd.

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