Gas rises on storage supply cut, high exports

Published 30th Dec 2010

Prompt gas prices rose on Thursday as exports to Belgium and a reduction in storage withdrawals tightened supply, market participants said.

Gas for delivery on Friday rose to 62.80 pence per therm at 4:46 p.m., up 2.30 pence from day-ahead contracts in the previous session. Contracts for immediate delivery traded at 62.75 pence, 2.10 pence higher than on Wednesday.

Gas withdrawals from Britain's largest storage site at Rough dropped overnight to zero from around 13 million cubic metres, National Grid data showed, although flows picked up to 15 mcm later in the session.

Long-range gas storage levels were nearly 45 percent lower on Thursday than the same time one year ago, National Grid data showed, as an early start to the winter season prompted higher storage withdrawals to meet rising demand.

The UK-Belgium gas interconnector (IUK) also reversed to export mode to the continent on Wednesday, a reflection of higher demand due to the return of the Swiss-Italian Transitgas pipeline last week, the analyst said.

The Transitgas pipeline, which brings north-west European gas to Italy, resumed full operations on December 24 after a five-month outage.

British gas demand for Friday remained low at around 10 mcm below seasonal norms as the weather turned milder. Met Office forecasts, however, predicted the return of colder weather over the coming three to five days.

Gas contracts further out climbed in line with firmer prompt prices, leading January 2.15 pence higher at 62.95 pence ($9.72 per mmbtu). February and March also gained nearly two pence at 62.50 pence and 61.30 pence respectively.

Britain also received an liquefied natural gas (LNG) tanker at its Teesside Gasport, the first in over a year, capping some gains.

Another eight vessels are expected over the next few weeks.

In the over-the-counter (OTC) power market, prices edged slightly higher in line with firmer gas as around 35 percent of Britain's electricity production currently stems from gas-fired plants.

Power for Friday delivery gained 50 pence to 49.75 pounds per megawatt-hour. The usual dip in power demand ahead of the weekend was less noticeable this week as electricity consumption was already dampened by the end-of-year holiday season.

EDF Energy's Torness 1 and Hinkley Point B-8 nuclear reactors remained offline since their unplanned outage on Tuesday, which added to a tighter system.

National Grid data showed both reactors would return to service on January 4.

The 450-megawatt Heysham 1-2 nuclear reactor also resumed operations on Thursday, adding to supply margins.

Source: ' Reuters '

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