Nena News

GAS – UK prices fall on mild weather, long system

(Montel) UK gas prices are falling on Thursday morning on mild weather forecasts, a long system and on news the Ukraine-Russia crisis is easing.

The day-ahead contract on the UK’s NBP hub last changed hands at 48.25p/th (EUR 22.68/MWh) at one broker, down 0.20p on the day.

Gas prices edged slightly higher in the Dutch and German markets, however, with the Dutch day-ahead TTF contract last seen up EUR 0.08 at EUR 22.50/MWh, while on the German market, the NCG day-ahead contract traded EUR 0.08 higher at EUR 22.63/MWh.

“Oil prices are increasing a bit today and an outage at the Gudrun field in the North Sea will cut gas supplies from Norway to Europe by about 6mcm/day until mid-March and that’s probably enough to push [continental] gas prices higher today,” said analyst Pål Svendsen from Nena.

“However, weather forecasts show milder than previously expected weather and the news today about Ukraine having made another prepayment to Russia’s Gazprom for gas deliveries is bearish,” he added. 

Ukraine has paid another USD 15m to Gazprom, enough to supply the country with 45.6mcm of gas, Russia’s international television channel RT reported this morning.

Russia’s Gazprom had previously threatened to cut supplies to its neighbour – possibly affecting EU exports too – over unpaid bills. 

“The gas markets will probably be very volatile until Gazprom and [Ukraine’s] Naftogaz manage to come to an agreement on gas deliveries to replace the one that will expire at the end of March,” said a Germany-based trader.

“Uncertainty breeds fear”

The new prepayment is only enough to supply Ukraine with Russian gas for another five days, so there is still uncertainty in the market, and “uncertainty breeds fear”, an Italy-based trader said. 

The front-month contract for Brent crude North Sea oil last changed hands up USD 0.58 on the day, at USD 61.13/bbl on the Ice exchange, a bullish sign for oil-indexed gas contracts. 

Temperatures in the UK are forecast to rise from 1C below the norm currently to 2-3C above average by the weekend and could potentially rise to up to 3C above average at the end of next week, said forecaster MetraWeather. 

In Germany, temperatures are expected to increase from around 1C below the seasonal norm currently to 2-3C above by Sunday and to remain around 0-1C above average next week, it added.

UK demand for gas in the 24 hours through to 06:00 UK time on Friday was forecast at about 286mcm/day at the time of writing, while supply levels were slightly higher, at 289mcm/day, data from TSO National Grid showed. 

Reporting by:
Iselin Rønningsbakk
12:37, Thursday, 5 March 2015