UK gas gains on short supply and looming cold

On Friday the system was left short by lower flows from UK gas fields, fewer imports and less liquified natural gas remains which moved gas prices higher. Traders said colder weather will drive demand for heating.

The within-day gas price gained 1.50 pence day on day to 67.20 pence per therm and day-ahead gas traded up 1.35 pence at 66.90 pence.

A trader at a utility said a mix of factors are impacting the prompt contract, lower supply and colder weather while the lengthy reduction in supply from Troll (Norway’s largest gasfield) is supporting the March contract.

National Grid data showed the UK gas system was short at around 15.5 million cubic metres per day (mcm/day). According to data from National Grid forecast demand of 294.7 mcm exceeded predicted supply of 279.2 mcm.

Data showed demand is expected to be 3.2 percent below seasonal norms, although the Met Office forecasts colder weather is expected after a recent spell of milder temperatures.

Analysts said the fall in supply was mainly the result of weaker flows through the Vesterled pipeline into the St Fergus terminal, where supply was down to 25 mcm/day from over 35 mcm/day on Thursday, while supply to continental Europe rose.

The IUK pipeline once again flipped into import mode, with 8 mcm/day expected to flow from Belgium to Britain. Supply from the South Hook LNG terminal is expected to fall to around 5 mcm, down from 9 mcm on Thursday.

Analysts said with no new cargoes observed for the terminal, reduced LNG supply is expected to continue also in February. Langeled and BBL (pipelines) are also flowing lower today.

Further along the curve traders said that lower output at Norway’s Troll gas field, which will last until early April, would continue to support month-ahead prices.

March gas gained 0.35 pence to 65.60 pence.

Further-out gas prices were also supported by strong crude oil with the British front-season gas price rising to 63.35 pence, up from 62.80 on Thursday morning.

Brent crude was trading at $115.62 a barrel on Friday, and earlier hit $115.91, its highest level in more than three months, as escalating tension in the Middle East stoked supply worries.

British over-the-counter (OTC) power prices rose day on day on the back of fossil fuel plant outages, even though underlying healthy supply margins kept prices comparatively low.

Day-ahead power traded at 48.63 pounds per megawatt-hour, up around 0.68 pounds on the previous session.