U.K. Natural Gas Declines as Flows Rise to Meet Record Demand

U.K. natural gas for same-day delivery declined as system flows increased to meet the highest-ever demand for the time of year in at least eight years amid colder-than-average weather.

Day-ahead and weekend contracts also fell, according to broker data compiled by Bloomberg. Total flows were at 389 million cubic meters a day, while demand in the 24 hours to 6 a.m. tomorrow was predicted at 375 million, the most since at least 2004, National Grid Plc data show. The average temperature in London tomorrow will be 0.5 degrees Celsius (33 Fahrenheit) versus a 10-year average of 8.4 degrees, according to MetraWeather data on Bloomberg using the ECMWF model.

Within-day gas retreated 2.5 percent to 97.5 pence a therm at 5 p.m. London time. Gas for tomorrow dropped 4.8 percent to 100 pence, while the weekend contract slid 11 percent to 93.75 pence a therm.

Gas for April rose for a sixth day, adding as much as 4.8 percent to 74.3 pence a therm, the highest month-ahead price since November 2008. Today’s price was equivalent to $11.27 per million British thermal units and compares with $3.95 per million Btu of front-month U.S. gas.

U.K. gas prices surged to seven-year highs on March 22 as a fault on the pipeline between Zeebrugge in Belgium and Bacton in England cut supplies equal to about a quarter of British consumption.

Today, imports from Belgium through Interconnector U.K. Ltd.’s link were at a rate of 60 million cubic meters a day after reaching a record 79 million cubic meters a day on March 22, according to National Grid data.

Norwegian Flows

Flows from Norway, the U.K.’s biggest source of imported gas, were at 125 million cubic meters a day versus a 30-day average of 108 million, Gassco AS data showed.

Inventories at Rough, the U.K.’s largest gas-storage facility, fell to an all-time low of 2,140 gigawatt-hours yesterday, equivalent to 199 million cubic meters, or 53 percent of today’s forecast consumption. The site is unable to flow at full capacity of 42 million cubic meters a day because of falling pressure, it said on March 19.

Liquefied natural gas tankers with a total capacity of 5.5 million cubic meters (3.1 million cubic meters of gas) arrived in the U.K. in the five months through February, according to data compiled by Bloomberg.

Centrica Plc, the U.K.’s largest household energy supplier, signed a 20-year deal to import natural gas from the U.S., securing supplies as production from British North Sea fields decline.

U.S. Supplies

Centrica will buy 1.75 million metric tons a year of LNG from Cheniere Energy Inc.’s Sabine Pass plant in Louisiana, the Windsor, England-based company said today. That’s equivalent to the demand of 1.8 million U.K. homes. The deal can be extended for another 10 years, it said. Prices will be linked to Henry Hub, the U.S. benchmark gas prices, and deliveries will start in September 2018. Centrica will buy the LNG on a free-on-board basis, meaning it can choose where to send the fuel.

The 261,137 cubic meter LNG tanker Mekaines arrived at the Isle of Grain terminal in the east of England yesterday, ship-tracking data showed. The 261,104 cubic meter Zarga was due at South Hook in Wales today, while the 211,885 cubic meter Tembek was scheduled to dock at Milford Haven on March 29. The 136,167 cubic meter Methane Kari Elin changed its destination to Milford Haven after leaving Trinidad, ship data showed today.

Gas accounted for 37 percent of U.K. power production at 4:30 p.m., grid data showed. Coal generated 35 percent, nuclear 14 percent and wind 8.1 percent.

Electricity for the next working day slid 1.3 percent to 73.75 pounds a megawatt-hour, according to broker data.