Bloomberg News

LNG Pushes U.K. Gas to 4-Year Low as Ukraine Fears Ease

July 07, 2014

U.K. natural gas prices fell to the lowest since April 2010 as more cargoes of the liquefied fuel were due to arrive and fears eased of supply disruptions through Ukraine.

Front-month futures declined as much as 3.9 percent on the ICE Futures Europe exchange in London. Flows from LNG terminals were as much as 24 percent higher than the 10-day average, according to National Grid Plc data, as three more tankers were scheduled to dock in Britain this month.

Russian gas supplies to Europe via Ukraine were proceeding normally, OAO Gazprom said in a statement. Ukrainian forces secured control of the Donetsk region towns of Artemivsk and Druzhkivka, after recapturing Slovyansk and Kramatorsk, turning the tide against pro-Russian insurgents. Brent oil, linked to contract gas prices in mainland Europe, fell to the lowest in more than three weeks as Libya prepares to boost exports and amid speculation Iraq’s crude supplies remain safe.

“Libya also may no longer be a drag on the energy supply chain,” INTL FCStone Inc. (INTL:US) said in a report e-mailed today. “Another crisis that is now well on its way to becoming self-contained is Ukraine. Rebel forces now seem to be on the back foot, with Russia reluctant to come to their aid.”

U.K. gas for next-month delivery fell to 35.1 pence a therm ($6.02 a million British thermal units) on ICE, the lowest since April 30, 2010. The fuel was trading at 35.45 pence at 4:38 p.m. in London. Dutch gas on the Title Transfer Facility hub declined as much as 3.4 percent to 15.43 euros ($21) a megawatt-hour, the lowest since May 2010, according to broker data compiled by Bloomberg.

LNG Imports

The U.K. received eight LNG tankers in June, one fewer than a year earlier, after May deliveries were little changed from a year earlier at 10 cargoes, according to data compiled by Bloomberg. Gas flows from LNG terminals reached about 51 million cubic meters a day, up from an average 41 million cubic meters a day in the past 10 days, data from network operator National Grid showed.

Cargoes are coming to the U.K. after milder-than-usual temperatures cut demand in Asia, the world’s biggest buying region. The Al Samriya will dock July 14 at the South Hook terminal on May 14, four days after the Al Ghuwairiya, according to the Milford Haven Port Authority. The Al Kharsaah is due at the Dragon terminal, also in Milford Haven, Wales, on July 15, according to ship-tracking data on Bloomberg. That would take the July total to six, one more than last year.

“LNG imports remain exposed to temperatures in Northeast Asia, which seem supportive of more LNG coming back to Europe,” London-based consultants Energy Aspects Ltd. said in a report e-mailed today. Imports “could begin to increase in 2015 as more supply becomes available in that market.”

Seventh Month

U.K. gas prices fell for a seventh month in June, the longest losing streak since at least 1997, with little support from seasonal maintenance on pipelines including Nord Stream from Russia to Germany. Prices are down 48 percent this year as Europe’s mildest winter in seven years left inventories high. Storage sites in the European Union were 71 percent full, the highest for this time of year since 2011, Gas Infrastructure Europe data showed.

“It remains hard to be bullish about the U.K. summer gas market, with supply threats posed by the Russia-Ukraine gas dispute and Nord Stream maintenance doing little to tighten the underlying gas market in June,” Energy Aspects said. “Storage injection requirements will stay below average.”

U.K. gas for within-day delivery fell as much as 2.9 percent to 35.2 pence a therm, the lowest since September 2010, while day-ahead fuel slid 3.8 percent to 35.1 pence a therm, also the lowest since September 2010, broker data showed. Total flows were at 205 million cubic meters compared with a 10-day average of 183 million cubic meters, National Grid data showed.

Demand including for exports and power generation was forecast at 191 million cubic meters, above the seasonal norm of 183 million cubic meters, according to grid data. Exports to Belgium were nominated at 19.2 million cubic meters, down from 20.6 million cubic meters yesterday, according to data from Interconnector U.K. Ltd.

To contact the reporter on this story: Isis Almeida in London at ialmeida3@bloomberg.net

To contact the editors responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net Rob Verdonck, Randall Hackley


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