U.K. Spot Gas Falls as Record Storage Flows Offset Norway CutsAnna Shiryaevskaya
U.K. natural gas for spot delivery fell after reaching a one-month high as record withdrawals from storage sites offset reduced flows from Norway.
Same-day gas declined 1.7 percent after advancing as much as 5.8 percent to the highest level since Dec. 29, according to broker data compiled by Bloomberg. Withdrawals from storage sites jumped to the highest level since Bloomberg started compiling National Grid Plc data in April 2013, helping meet increased demand amid colder-than-normal temperatures.
Outages at the Sleipner field and the Kollsnes gas plant in Norway cut flows to the U.K. for as many as four days, according to data from pipeline operator Gassco AS. Norwegian flows into Britain fell to less than a quarter of forecast demand, Gassco data showed. Storage withdrawals reached an all-time high of 118 million cubic meters a day, according to National Grid data.
Below-average temperatures are forecast for the next five days, according to MDA Weather Services. The lowest power generation from wind since Jan. 22 boosted the share of gas used for electricity to 35 percent, according to National Grid Plc.
Same-day gas fell to 48.3 pence a therm ($7.27 a million British thermal units) by 3:29 p.m. London time after reaching 52 pence earlier today, broker data show. The next-day contract advanced a fifth day, rising 0.3 percent to 48.40 pence a therm.
Gas exports from Norway to the U.K. were at 85 million cubic meters (3 billion cubic feet) a day, from as much as 115 million yesterday, according to Gassco. Sleipner output will be cut by 12.2 million cubic meters Monday after an outage that started on Friday while Kollsnes flows will be cut by 34.5 million cubic meters Monday after a reduction since Thursday, Gassco said.
“Undoubtedly this has led to the surge on the spot and helped support the near curve,” Nick Campbell, an energy risk manager at Inspired Energy Plc, said by e-mail. “Lower wind generation has also increased system gas demand.”
The share of gas in power generation was 35 percent, the highest since Jan. 22, while coal accounted for 36 percent, nuclear for 17 percent and wind for 3.1 percent, National Grid data show.
Temperatures in the U.K. will be as much as 5 degrees Celsius (9 degrees Fahrenheit) below normal Monday, Byron Drew, lead forecaster at MetraWeather, said by e-mail. While Britain will warm to about 1 degree Celsius less than usual by early next week, Germany will cool from as much as 2 degrees below normal Monday to as much as 5 degrees less through the middle of the week, he said.
U.K. gas demand is forecast at 364 million cubic meters a day, compared with a seasonal norm of 294 million, National Grid data show. The nation’s pipelines will contain about 9 million cubic meters more gas at 6 a.m. London time Tuesday from the same time Monday, the data showed. That compares with a shortage of 48 million cubic meters expected earlier.
Front-month gas rose 0.7 percent to 46.2 pence a therm on the ICE Futures Europe exchange. The contract for the balance of this month traded at 47.45 pence a therm, broker data showed.
With gas for the balance of the month trading at a discount to spot, the gains are likely to be short term, Campbell said.
“It is likely that once the temperatures begin to return to the seasonal norm and Norwegian upstream issues dissipate then there is scope for the spot and near-term products to shed the gains,” he said.