U.K. Gas Falls to 3-Year Low as Demand Tumbles on Warm Weather
U.K. natural gas fell to a three-year low as weather forecasts pointed to higher temperatures this week than previously estimated and demand declined to the lowest level since October.
Front-month gas dropped as much as 5.1 percent to the least since Nov. 17, 2010, on the ICE Futures Europe exchange in London. Weather forecasts have trended warmer for this week, with temperatures above normal across large parts of Europe, according to MDA Weather Services in Gaithersburg, Maryland. Today was the hottest day of the year in the U.K., with 21 degrees Celsius (70 degrees Fahrenheit) recorded in Frittenden, England, the Met Office said in a statement today.
U.K. demand was forecast to decline 7 percent today, the lowest for a weekday since Oct. 31, according to National Grid Plc (NG/), the network manager. Inventories are above average levels after the mildest winter in seven years ended two days ago.
“It’s what we keep referring to as a perfect storm, in that we’ve had an incredibly mild first quarter, which left an overhang of storage,” Nick Campbell, an analyst at Inspired Energy Plc (INSE) in Kirkham, England, said today by phone. “Demand is not there really to fill up storage and that’s all been weighing on spot and prompt and it’s just giving everything a very bearish feel to it.”
Front-month gas dropped as low as 48 pence a therm ($7.99 a million British thermal units) and was at 48.8 pence at 4:57 p.m. in London. The contract lost 28 percent since Oct. 1, the first day of the winter heating season. Day-ahead gas fell as much as 6.4 percent to 47.15 pence a therm, the biggest drop since June 21, before trading at 48.5 pence, according to broker data compiled by Bloomberg.
The six-month winter period was the hottest since 2007 and the second-warmest since 1981, according to MDA. Temperatures in the south of the U.K. will be more than 4 degrees Celsius above average levels over the next days, MDA said today in an e-mailed report. Most of Europe will be milder-than-normal this month, according to five out of six meteorologists surveyed by Bloomberg.
U.K. average temperatures tomorrow will be 10.5 degrees, compared with a seasonal norm of 8.2 degrees, according to WSI Corp. data on Bloomberg using the ECMWF model at 6:55 a.m. The high in London will be 19.9 degrees, compared with a 10-year average of 16 degrees, according to CustomWeather Inc.
Demand in the 24-hour period to 6 a.m. tomorrow will be 201.3 million cubic meters, according to National Grid. Supply will be 1.9 million cubic meters higher than demand in the period, grid data show.
Supply from the South Hook liquefied natural gas terminal was at 29.9 million cubic meters a day, compared with a 10-day average of 15 million, grid data show. The facility in south Wales is scheduled to receive three tankers from tomorrow to April 8. LNG terminals usually start flowing gas before cargoes arrive to make storage room, Campbell said.
“With temperatures mild and the forecasts suggesting we are well into spring, so the withdrawal season has finished, summer gas looks much more relaxed,” Trevor Sikorski, an analyst at Energy Aspects Ltd. in London, said by e-mail today. “With Asian demand softening over the coming quarter, we could well see some more LNG coming in so prices are getting pressured downwards.”
To contact the reporter on this story: Isis Almeida in London at email@example.com