UK GAS-Prices rise as cold weather forecasts spur buying
British gas prices rose on Tuesday morning on forecasts of a cold snap and fears prices will need to climb much higher to attract LNG deliveries if the cold weather continues.
The within-day gas contract was up by 2.5 pence, or 5 percent, at 52.75 pence per therm at 0954 GMT. Gas for day-ahead delivery rose by 2.1 pence to 52.90 pence per therm.
Traders said cold weather forecasts had pushed prompt prices higher despite oversupply in the system, while fears of an extended cold snap also moved the front-month contract higher.
Britain’s Met Office forecast daytime temperatures could be around 2-5 degrees Celsius from the middle of the week, with below zero temperatures towards the weekend.
Home heating accounts for 40 percent of Britain’s gas use, meaning cold temperatures can have a big impact on the market.
One trader said the wide spread between Asian liquefied natural gas (LNG) and British gas prices meant it would be hard for Britain to attract new deliveries of LNG if the cold snap continued and more supplies were needed.
“If storage stocks run down, and we need to attract LNG, the price is around 10 euros higher,” he said.
The British February gas contract rose 2.51 pence to 54.40 p/therm.
Asian LNG prices for February delivery have risen to almost $10/mmBtu due to strong winter demand in Asia’s northern hemisphere and supply outages.
Further out on the curve, the British Summer 2017 contract rose 1.19 pence to 46.55 p/therm, while the Winter 2017 contract gained 1.1 pence to 51.40 p/therm
In the Netherlands, the day-ahead gas price at the TTF hub rose by 0.68 euro to 19.88 euros per megawatt hour (MWh).
In the European carbon market, the benchmark contract rose by 0.28 euro to 5.56 euros a tonne.
Source: Reuters (Reporting by Susanna Twidale; Editing by Mark Potter)