LONDON: British gas prices face downward pressure throughout August as increasing shipments of liquefied natural gas (LNG) from Qatar pack storage tanks and boost flows from import terminals, traders said.
Qatar, the world's biggest LNG exporter has started shipping more gas on tankers to north-west European terminals in Britain and Belgium, because mild weather has sapped demand in top importers Japan and South Korea since early June.
Drilling advances have led to a glut of shale gas in the United States, leaving Europe as the best alternative to Asia for shipped LNG.
Reuters data showed one Qatari LNG tanker was moored in Britain on Thursday and another four Qatari vessels were expected to arrive by next Thursday.
The combined shipments are enough to meet the UK's total gas needs for four days, equating to 733 million cubic metres of the fuel.
Two more Qatari tankers have unloaded at British ports over the past few days. Meanwhile, Belgium's Zeebrugge port expects an additional four shipments from the Gulf state in Aug. 6-15.
"I see further price declines this week if terminals continue pumping out at current rates," a trader said.
UK prices have dropped with the rise in inbound shipments.
A widening spread between August and September gas prices illustrates the trend. Last week the price difference was at 1.6 pence a therm compared with 2.25 pence now, price data shows.
September, which is trading at 54.3 pence/therm, is less prone to price declines because LNG delivery schedules are not available that far ahead.
"There is still a lot of storage injection demand (into underground sites) so I can't see gas price dropping down to coal-switch levels of about 40 pence," another trader said.
The vast majority of August shipments are headed for the South Hook terminal, bankrolled by Qatari cash, in Wales.
At present rates South Hook is pumping out 52.7 million cubic metres a day and traders expect it to maintain that rate through the weekend given the heavy pace of deliveries.
Terminals must clear space in storage tanks to accommodate new supplies of gas.
"From next week, I see output from South Hook at 70 percent of current levels - congestion of cargo deliveries right now is driving higher flows," a trader said.
The price of liquefied natural gas (LNG) in Asia has fallen 30 percent since June as collapsing demand in the region subdues the world's biggest spot market for the fuel.
The onset of above-average temperatures in Japan this week may limit deliveries to Europe due to greater air-conditioning demand there if temperatures stay high.
Topped up inventories at Japanese terminals mean only a lasting increase in gas demand will allow them to import more.
However, demand across Asia has so far shown little signs of strengthening.
Cargoes that would have headed for Asia started arriving in Europe this month, with two Nigerian cargoes delivered to a new terminal in the Netherlands and the BG Group-led Dragon terminal in the UK receiving another a Nigerian cargo.
For more than a year, seaborne deliveries to Europe had slumped as tankers were diverted to Asia to take advantage of the biggest price differentials since 2009.
However, with Asian prices declining to $13.50 a million British thermal units (mmBtu) this week, producers are squaring away surplus cargoes into Europe.
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