Spring Cold Jolts U.K. Natural Gas Trading to Busiest Week Everby
Day-ahead gas on NBP rose most in three years, then plunged
Aggregate volume on ICE increased to most on record this week
A blast of chilly weather this week revitalized the U.K.’s natural gas market, where prices have been moving steadily downward since the end of 2014.
Unseasonal cold sent day-ahead gas prices on the U.K.’s National Balancing Point hub up the most since November 2013 on Tuesday and then down the most in three years the following two days to end the month almost where they started. The volume of front-month gas contracts traded on the ICE Futures Europe exchange in London rose to a record this week.
The violent moves underscored how influential a bullish signal can be in a market that has had little but bearish news. European gas use rose just 4.5 percent in 2015 after an 11 percent drop in 2014, while Norway and Russia, the region’s two largest suppliers, see output rising to records as the start of liquefied natural gas plants in the U.S. and Australia add to a global glut.
“Every day for awhile it seemed like we were reaching higher levels and stop losses were being broken; the increase of buying activity pushed prices up,” said Guillermo Baena Gomez, a London-based senior energy trader at Advantage Utilities Ltd. “But the main fundamentals remain bearish.”
Day-ahead gas is set to drop about 4 percent this week, after the biggest seven-day gain since November through April 22, according to broker data compiled by Bloomberg. It has risen about 4 percent this month, its first increase for April since 2010. Seasonal gas contracts also headed for a weekly decline, with gas for delivery in the winter of 2016 falling the most ever on Thursday. The contract rose a record 12 percent last week.
Traders, who have been bearish front-month gas all but two weeks since at least April 2015, said the rally was likely a one-off, according to a Bloomberg survey. Western Europe is forecast to see average temperatures this summer, with the U.K. expected to be cooler than normal, hurting prospects for air-conditioning demand that would help draw down the oversupply.