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UK gas extends declines as ample supplies offset Ukraine risk

ANNA SHIRYAEVSKAYA

LONDON (Bloomberg) -- UK natural gas for August fell for a second day as tanker arrivals top up supply, reducing immediate risks posed by the escalating Ukraine crisis.

The August contract in the UK, Europe’s biggest market, declined as much as 1.4% after closing 4% down on July 18, according to broker data compiled by Bloomberg. The contract gained 6.9% the day earlier, the most since April 7, after the downing of flight MH17 over rebel-controlled territory in eastern Ukraine threatened to escalate tensions between the West and Russia, Europe’s biggest gas supplier.

Inventories in the European Union’s 28 member states were almost 76% full as of July 20, compared with 53% a year earlier, according to Gas Infrastructure Europe, a lobby group in Brussels. The South Hook LNG terminal was supplying 23% of total flows into the UK after the Shagra tanker arrived at the facility in Wales on July 19.

“A rise in LNG send outs from South Hook toward recent averages following the docking of the Shagra on Saturday, together with lower storage injections, are leaving the system well supplied,” Wingas UK Ltd. said in an emailed report. “The high levels of storage stocks across Europe continue to pressure prices, with increased likelihood that these will be filled over the coming weeks.”

UK gas for delivery in August fell 0.7% to 37.85 pence a therm ($6.46 a million British thermal units) at 10:03 a.m. London time, broker data showed. Winter gas, for delivery in the six months from October, declined 0.9% to 57.95 pence a therm.

Temperatures in northwest Europe and the UK are forecast at 20.4 degrees Celsius (69 Fahrenheit) tomorrow, July 22, compared with a seasonal norm of 18.9C, according to WSI Corp. data using the ECMWF model at 7:55 a.m. Gas has been the preferred fuel choice in power generation this summer, with 48% of electricity output today coming from gas-fired plants, compared with 22% for nuclear and 18% for coal-fired plants.

Russian Supply

Gas flows at the border with Ukraine are proceeding normally, without reductions in pressure or volumes as of 9 a.m. local time, Slovakia’s pipeline operator Eustream AS said on its website. Russian gas supplies via Ukraine, which meet 15% of Europe’s demand for the fuel, haven’t been affected since OAO Gazprom, the Moscow-based exporter of the fuel, cut deliveries to NAK Naftogaz Ukrainy for overdue debts on June 16. Similar gas price disputes between Russia and Ukraine cut flows to Europe in 2006 and 2009.

Total flows into the UK are at 172 million cubic meters, compared with forecast demand of 171 million cubic meters, according to National Grid Plc.

07/21/2014

 

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