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British industrial natural gas demand declines amid record NBP prices

Additional reporting by Jake Stones

LONDON (ICIS)–British natural gas demand from several major industrial offtake points across the National Transmission System (NTS) has plummeted amid surging NBP prices across 2021, but UK gas traders believe overall reduced demand will have little impact on gas prices.

As the course of 2021 progressed, industrial offtake dropped from around 10 million cubic metres (mcm)/day to around 6mcm/day as of September, according to National Grid data. Of the NTS offtake points for industry, Immingham, Grangemouth and Billingham points have shown the highest fall in recent weeks, the data showed.

The reduced offtake has generally been the result of higher UK gas prices. For example, petrochemicals companies that rely on natural gas as feedstock have felt the brunt of higher wholesale prices. Industries that use gas as a petrochemical feedstock, like CF Fertiliser at Billingham, will be thinking about closing or cutting production over the coming days or weeks, principal European gas and LNG analyst at Wood Mackenzie, Graham Freedman, told ICIS.

Freedman added that going forward, much will depend on the nature of each buyer’s gas supply contract and the level of exposure to wholesale prices that they have, anticipating that a number of European governments may step in to support essential industries over the coming weeks.

CONTINUED HIGH PRICES

The NBP October ‘21 contract was assessed at 175.8p/th on 15 September, a record high for a front-month product at the hub in ICIS pricing history, and almost four times the NBP front-month price on 1 April 2021.

The NBP front month rebounded back above 170p/th, for only the second time in ICIS records, in morning trading of 20 September.

With traders generally expecting the bullish trend on key European benchmark gas prices to continue going forward amid tight supply fundamentals, industrial demand could come under further pressure.

A trader did not expect the downturn in industrial demand to have much price impact itself.

“The market is so worried about a shortage that anything remotely bullish is treated as a certainty, and anything bearish is treated with scepticism,” the trader added.

Freedman also thought reduced industrial demand was unlikely to impact NBP prices significantly, with large global supply and demand imbalances exerting greater influence currently.

Participants using the three points, INEOS, Prax and Philipps 66, did not reply when asked whether price spikes had reduced offtake.

Another trader said that they expected prices to remain high but with strong volatility over the approaching gas winter. They also said that the impact to industrial demand may not last beyond the gas winter either.
Source: icis by Kaja Sillett https://www.icis.com/explore/resources/news/2021/09/20/10686652/british-industrial-natural-gas-demand-declines-amid-record-nbp-prices

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