LONDON: British wholesale gas prices fell on Wednesday as weak demand left the system slightly oversupplied and cheaper oil weighed on the market, although high gas exports to continental Europe provided some support.
Gas for delivery in October traded at 49.05 pence per therm at 0735 GMT, down 0.5 pence on its last settlement, and prices for delivery over the winter 2014/2015 season were down 0.30 pence to 59.10 pence per therm.
Gas prices for delivery on Thursday, however, were steady at 45.75 pence per therm, supported by high export levels to continental Europe, traders said.
"On a local scale, Britain's gas market was a bit oversupplied this morning and on a global scale, the oil market is better supplied than it has been for a long time, hence prices are falling," one trader said.
Brent crude oil prices fell below $99 a barrel and to their lowest level since spring 2013 on Wednesday as plentiful supplies combined with sluggish demand.
Britain's gas demand was expected to be 165.7 million cubic metres (mcm) on Wednesday, around 3.5 percent below the seasonal norm, according to National Grid data.
The low demand is a result of the warm weather that has moved into Britain in the past days, and meteorologists say temperatures are expected to remain well above the seasonal norm of 14.5 degrees Celsius for most of the month.
With flows seen above 166 mcm, the system was expected to be slightly long, which would usually allow for storage injections to prepare for the upcoming peak demand winter season.
"The issue is that Britain's gas storage sites are virtually full, so when there's low demand to use gas immediately and no option to inject excess gas into storage, the surplus supplies have to be offered at a discount, for example for export to continental Europe," another trader said.
Britain's gas storage sites are filled to an average of almost 98 percent, compared with just 60 percent this time last year, according to data from Gas Infrastructure Europe.
Helped by a warm first half of the year, European utilities have injected as much gas into storage this summer as possible in order to prepare for any potential disruption of gas flows from Russia, which is the continent's biggest provider but sends over half its exports to Europe via Ukraine.
Comments
Comments are closed for this article.