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U.K. Gas Pares Record Weekly Gain Amid Ukraine Concern

U.K. gas for August fell, paring a record weekly gain as the downing of a Malaysia Airlines jet increased concern that the conflict between Russia and Ukraine will disrupt supplies to Europe.

The August contract in the U.K., Europe’s biggest market, declined 4 percent on the National Balancing Point hub after rising 6.9 percent yesterday, the most since April 7, according to broker data compiled by Bloomberg. Russia and Ukraine blamed each other for the incident that killed all 298 people on board that may prove to be a turning point in the five-month conflict between the two countries.

The disaster happened a day after the U.S. and the European Union imposed further sanctions on Russia over the conflict. Russia meets about 30 percent of Europe’s gas needs, half of which goes through pipelines crossing Ukraine. Disputes between the two former Soviet nations disrupted supplies to the EU in 2006 and 2009 amid freezing weather.

“Any macro event like that will cause knee-jerk reactions of that manner, but I think we have now seen most of the price action,” Tobias Davis, a broker at GFI Securities Ltd., said by e-mail today. “It’s such a horrific event and it just adds to the already outstanding geopolitical risk.”

U.K. gas for delivery in August fell to 38.1 pence a therm ($6.50 a million British thermal units) at 5:23 p.m. London time, paring a weekly gain to 7 percent, the most since April 11, broker data showed. Weekly advances were as much as 12 percent earlier today, the biggest since the contract started trading in January. The winter contract, for delivery in the six months from October, slid 1.9 percent to 58.5 pence a therm.

Exchange Trading

On the ICE Futures Europe exchange, the contracts rose 0.5 percent and 0.4 percent, respectively. The settlement price for yesterday is calculated using the weighted average of trades from 4 p.m. to 4:15 p.m., before most of yesterday’s move higher. Front-month ICE futures advanced another 3 percent after 4:15 p.m. yesterday.

Ukraine’s state security service said it intercepted phone conversations among pro-Russian militants discussing the missile strike, which knocked the Boeing Co. 777 on Malaysia Airlines flight 17 from Amsterdam to Kuala Lumpur from the sky within 50 kilometers (30 miles) of the Russian border.

President Vladimir Putin, who has denied Russian involvement in the fighting, said Ukraine bore responsibility because the crash wouldn’t have occurred without the current strife with separatists. The missile was fired from the area controlled by separatists, U.S. President Barack Obama said today.

Netherlands, Germany

“We have been concerned since March that Ukraine’s efforts to crush the rebellion by ethnic Russians might cause violence in the region to spiral out of control,” Paul Christopher, chief international strategist at Wells Fargo Advisors LLC, said in a report e-mailed yesterday. “If this terrible loss of life on the Malaysian airliner is the result of miscalculation by one side or the other, then the other side could decide to escalate further.”

Dutch gas for August on the Title Transfer Facility hub fell 4.1 percent to 16.50 euros ($22.30) a megawatt-hour, after jumping 6.5 percent yesterday, broker data showed. The equivalent contract on NetConnect Germany declined 3.7 percent to 16.80 euros a megawatt-hour, the data showed. Germany gets 37 percent of its gas from Russia, the Netherlands 5 percent.

“You can sense the nervousness of the market this morning on the back of further potential geopolitical unrest,” Stuart Jones, head of European gas at Tradition Financial Services Ltd., said by e-mail today. “A lack of depth and liquidity has led to markets gapping on little volume.”

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