Winter Blues Beckon for U.K. Gas After Best Summer in Decade

  • Fuel for winter soared 29 percent in six months to Sept. 30
  • Flows from Russia to Qatar offset U.K. Rough storage woes

The best summer for U.K. gas in at least a decade may not be enough to fend off a “boring” winter.

Futures for fuel deliverable this winter jumped 29 percent in the six months to their Sept. 30 expiry date amid storage outages and reduced European Union production, according to broker data compiled by Bloomberg. Next-month prices are still near the lowest level for the time of year since 2009, buoyed by supplies from Norway and Russia, expanding liquefied natural gas imports and higher-than-ever EU storage levels.

“Looking at the fundamentals of the gas industry, there’s enough gas, there’s enough capacity -- it should work out,” Ludwig Moehrig, managing director for sales at gas trader Wingas, a unit of Russia’s Gazprom PJSC, said in an interview in Dusseldorf on Sept. 27. “And there’s also no storage shortage. So it could be quite boring.”

Europe has sought to diversify its gas supply away from Russia, still good for about 30 percent of the total, after flows were cut twice during freezing temperatures since 2006 amid rows with transit nation Ukraine. While the former Soviet nations remain at odds, gas is flowing into Europe from the east at a record level. Supply from Norway this year is also forecast near last year’s record.

The 28 EU nations had a record 87.2 billion cubic meters (3.1 trillion cubic feet) of gas in storage as of Sept. 28, or about 20 percent of 2015 consumption, according to data from Gas Infrastructure Europe and lobby group Eurogas. That should provide a cushion for the U.K., which is starting the winter with the lowest inventories since at least 2009 after Centrica Plc in June halted injections into Britain’s biggest facility, Rough.

The U.K. heating season started Saturday, and the period will last until the end of March.

For more on the impact of the Rough storage outage, click here

The Netherlands, which has already used up almost 80 percent of its reserves, further cut output at the EU’s biggest field, Groningen, from Oct. 1. The Dutch government supported extraction limits because of earthquakes in the region just as production at other fields in the North Sea is declining as reserves are depleted.

While prices will rise if February or March get “very cold,” the increase will be short-lived, Wingas’s Moehrig said.

The beginning of the winter is set to be warm. Temperatures in October are expected to be as much as 1 degree Celsius (1.8 degrees Fahrenheit) above normal in east Europe, spreading to the south and west of the region in November, according to MDA Information Systems LLC.

Europe may get a boost from supplies via sea-going tankers. LNG imports are forecast to rise 16 percent in the fourth quarter compared with the same period last year, or to 12.8 million tons, Energy Aspects Ltd. said in a note published Sept. 29. A 56 percent year-on-year increase is forecast for the following quarter, with 16.5 million tons of LNG arriving in Europe.

“That additional supply will help in the event that Europe has a colder-than-normal winter,” Energy Aspects analysts Trevor Sikorski and Alex Tertzakian said in the note.

Before it's here, it's on the Bloomberg Terminal.