U.K. Day-Ahead Gas Set for Biggest Weekly Gain Since March 2013

  • Prices advance amid increased use for power generation
  • Norwegian flows to Britain decline even as some outages ended

U.K. natural gas for next-day delivery headed for its biggest weekly gain in more than three years as supplies tightened and power plants boosted demand.

The fuel advanced 8.1 percent Friday for a weekly increase of 19 percent, according to broker data compiled by Bloomberg. Gas-fired power generation reached the highest level since Sept. 8 on Friday and the profit margin for burning the fuel for electricity rose to the highest since October 2008 on Wednesday.

The U.K. network is forecast to have a shortfall Friday as increased demand to offset lower wind output coincided with a drop in flows from Norway. Works in Norway, Britain’s biggest foreign supplier, are continuing to limit supply.

“Import from Norway has declined a bit due to some outages, adding a little pressure to an otherwise very oversupplied market,” Energi Danmark said in a research note, referring to Thursday’s gain. “Furthermore, low wind production raised demand for gas for power production, causing a rare day with a shortfall in supply.”

U.K. gas for the next working day jumped to 28.65 pence at therm ($3.77 a million British thermal units), the highest level since Sept. 5 by 11:06 a.m. in London. The contract’s 30-day volatility is at its highest since March 2012.

Norwegian flows to Britain fell to 47 million cubic meters a day (1.7 billion cubic feet) on Friday, compared with a 10-day average of 64 million cubic meters. Total Norwegian exports climbed as high as 189 million cubic meters a day, the highest since Aug. 27, as an outage ended at a German import terminal.

An end to an abnormally hot weather in the U.K. also boosted demand in the industrial, commercial and residential sector, Marcel Boonaert, head of trading at Wingas U.K., said in a research note Friday.

Demand for the sector is set to rise to 76 million cubic meters during working days next week, up from 66 million cubic meters on Friday, according to a Bloomberg model. Temperatures are forecast to move closer to seasonal norms next week after rising 6 degrees Celsius (10.8 degrees Fahrenheit) above the seasonal norm on Tuesday, according to The Weather Co.