Wednesday, June 11, 2014

UK natural gas prices rose from year lows in June

British day-ahead wholesale gas prices rose 2.9 percent on Wednesday on undersupply forecasts, a drop in LNG availability from import terminals, and the risk that EU-brokered talks between Ukraine and Russia over a pricing dispute will drag on.
The prompt contract gained 1.1 pence to a four-day high of 38.65 pence/therm, climbing back from a near four-year low of 36.25 pence hit on Monday due to low demand and healthy supply.
British gas demand was forecast to be around 205 million cubic metres (mcm) on Wednesday, some 28 mcm above predicted supply, according to the National Grid .
Nominated sendout from Britain's liquefied natural gas (LNG) terminals was estimated to fall to 44 mcm from 50 mcm on Tuesday, which analysts at Thomson Reuters Point Carbon said could be to offset a rise in supply caused by the closure of an export pipeline.
The InterconnectorUK (IUK) pipeline, which sends gas to continental Europe, was taken offline on Wednesday for maintenance that is expected to last until June 26, meaning more supply availability.
"LNG could be one of the supply source that will adjust down following the cut in IUK exports. We have therefore reduced our LNG sendout forecast over the next 15 days," the analysts said.
Three LNG cargoes carrying a total 444 mcm are also due to arrive in Britain over the next week, helping to increase supply and boost storage injections.
Meanwhile, Russia and Ukraine will resume efforts to resolve a gas pricing dispute on Wednesday after a Russian deadline for Kiev to pay some of its debts passed without Moscow cutting off supplies.
"If no solution is found over the day, gas prices could go up," the Point Carbon analysts said.
Russia's Gazprom has moved a deadline for Ukraine to start paying in advance for gas to June 16, the Kremlin controlled company's chief executive said.
Ukrainian Prime Minister Arseny Yatseniuk said his country had rejected a proposal by Moscow for what would amount to a reduction of $100 per cubic metre in the price Kiev pays for Russian gas.
A Gazprom spokesman said Russian gas supplies to the European Union remained stable.
British gas prices further down the forward curve also increased, with the within-day contract adding 4 percent to 38.75 pence/therm.
Gas imports from Norway via the Langeled pipeline were healthy but expected to drop from June 15, when compressor maintenance at the country's Troll gas is due to start.
"We believe the combination of that maintenance with the maintenance that started at (Norway's Kollsnes gas processing plant) on June 7 should slightly impact Langeled flows downward," the Point Carbon analysts said.
Temperatures across Britain are expected to remain above seasonal norms over most of the next two weeks.
British day-ahead baseload power also rose, gaining 80 pence to 37.70 pounds per megawatt-hour. 

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