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UK GAS-Prompt drops to two year low on low demand, IUK shutdown

British wholesale gas prices dropped to their lowest in nearly two years on Tuesday as a planned shutdown of the IUK pipeline between Europe and Britain, coupled with warm temperatures and strong wind output, created oversupply.

* Within-day gas dropped by 12.00 pence to 24.00 pence per therm at 0908 GMT, its lowest level since June 2017.

* Day-ahead gas was 6.60 pence lower at 26.50 p/therm, also the lowest since June 2017.

* The IUK pipeline, which transport gas between Europe and Britain, started its annual shutdown for maintenance on April 21. The pipeline can both export and import gas.

* As a result, injections into storage facilities increased over the long Easter weekend and are close to full capacity.

* “This is the main reason for strong oversupply today and we expect the injections adjusting higher over the day today,” said Refinitiv gas analysts.

* Temperatures are also warmer than previously expected and strong wind generation reduced demand for gas, adding to oversupply.

* Gas demand in Britain was forecast at 164.8 million cubic metres (mcm) and flows at 203.2 mcm/day, leaving the system oversupplied by around 40 mcm, National Grid data showed.

* Average daily temperatures in Britain are expected to be higher than forecast, at 14.4 degrees Celsius on Tuesday and 12.8 C on Wednesday.

* However, temperatures are forecast to decline towards the down towards seasonal normal this week.

* Peak wind power generation is forecast at 8.4 gigawatts (GW) on Tuesday and is expected to rise to 9.6 GW on Wednesday, National Grid data showed.

* Strong power production from wind turbines typically reduces demand for electricity from gas-fired power stations.

* Britain received a liquefied natural gas tanker on Monday and expects eight more to arrive by May 2.

* The May gas contract was down 1.35 pence at 33.10 p/therm.

* The benchmark Dec-19 EU carbon contract was up by 0.45 euro at 27.37 euros per tonne

* Day-ahead gas at the Dutch TTF hub was down by 0.83 euro at 14.10 euros per megawatt hour.
Source: Reuters (Reporting by Lefteris Karagiannopoulos in Oslo; editing by Nina Chestney)

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