LNG, Warm Weather Push U.K. Gas to Lowest Since 2010

U.K. natural gas futures fell to the lowest level in more than three years on constant arrivals of tankers carrying the liquefied fuel amid rising inventories and forecasts for warmer-than-usual weather this week.

Front-month gas in the U.K., a European benchmark, tumbled 3 percent on the ICE Futures Europe exchange to the lowest since Sept. 28, 2010. Two LNG tankers coming from Qatar, the world’s largest producer, are scheduled to dock at British ports this week, according to ship-tracking data on Bloomberg and information from port authorities. Two more tankers already unloaded in the U.K. this month and another nine in April.

Storage facilities in the U.K. were 63.7 percent full as of yesterday, the highest level for this time of the year since at least 2007, after the mildest winter in seven years cut demand for the fuel used in heating, according to data from Gas Infrastructure Europe, a Brussels-based lobby group. Central and western Europe will get temperatures “slightly” above normal by midweek, MDA Weather Services in Gaithersburg, Maryland, said in a report e-mailed yesterday.

“Secure gaseous (Norway) as well as super-cooled (Qatar) gas flows to the U.K. on top of ample natural gas inventories are not the only bearish factors,” JBC Energy GmbH said in a report e-mailed today. The consultancy also cited “sustained warmer-than-usual temperatures.”

Dutch Gas

Front-month gas closed at 45.73 pence a therm ($7.76 a million British thermal units) on ICE. Futures trading volume was 33 percent below the average for the last 100 days, according to data compiled by Bloomberg. Dutch gas for June delivery on the Title Transfer Facility hub slid as much as 3.5 percent to 19.43 euros ($27.06) a megawatt-hour, according to broker data compiled by Bloomberg.

“The downward development is derived from gas market fundamentals despite the politically sensitive situation in Ukraine,” JBC said. “However, natural gas supply security in Europe cannot be taken as a given even though for the moment, Russian flows via Ukraine should not be at risk on grounds of an agreement reached among all parties concerned.”

The Group of Seven nations agreed to find new sources of energy to prevent Russia from using its oil and gas reserves as a “political weapon,” said German Economy and Energy Minister Sigmar Gabriel. The world’s top economies will expand their gas infrastructure, increase efforts to save energy and use renewable power as part of the agreement, he said at a press briefing in Rome today. The countries will also draw up a plan to deliver emergency supplies to countries like Ukraine that may face shortages, Italy’s Federica Guidi said.

Flows into the U.K. network were at 204 million cubic meters (7.2 billion cubic feet) a day, compared with a 10-day average of 211 million cubic meters, National Grid Plc data show. Supply from Norway, Britain’s biggest foreign supplier, was at 56 million cubic meters, in line with the 10-day average of 57 million, Gassco AS data show. An LNG tanker is set to dock at the South Hook terminal tomorrow and another is scheduled for May 10.

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