UK GAS-Prompt prices continue to decline amid low demand, strong LNG supply

4/21/2020

Prompt British wholesale gas prices fell, extending losses from the previous day, amid low demand and oversupply.

The day-ahead contract dropped by 1.00 pence to 9.40 pence per therm by 0830 GMT.

The within-day contract fell by 1.75 pence to 9.00 p/therm.

The day-ahead price is at a record low and is almost a third of the contract’s price a year ago, Refinitiv Eikon data shows.

The reason for the drop is mainly an oversupplied system amid weak demand and strong liquefied natural gas (LNG) send-outs, as well as low capacity of pipelines exporting gas from Britain to the Continent, a gas trader said.

UK gas system was oversupplied by 10.8 million cubic metres (mcm), with demand expected at 212.3 mcm and supply at 223.1 mcm/day, National Grid data showed.

Both residential consumption and gas-for-power demand are expected to fall on Tuesday because of mild and windy weather.

Gas power plants were providing around 28% of the country’s electricity on Tuesday morning, while wind power accounted for over 35%.

Residential consumption is expected to keep falling this and next week. Gas-for-power demand is forecast to rise to 31 mcm on Wednesday from 19 mcm on Tuesday, Refinitiv data showed.

Peak wind power generation is forecast to decrease to 9 gigawatts (GW) on Wednesday from 11.6 GW on Tuesday, Elexon data showed.

On the gas supply side, LNG send-out was expected to increase to 85 mcm on Tuesday from 72 mcm on Monday.

At least eight tankers are expected at British LNG terminals by May 11.

Norwegian flows were predicted to inch up by 2 mcm and UK Continental Shelf flows to go down by 4 mcm on Tuesday.

Flows from Britain to Continental Europe increased but traders said current capacity was not enough, with one of them adding that the reverse capacity at the BBL pipeline between Britain and the Netherlands nearly fully booked since last week.

The UK May gas contract fell by 0.65 p to 13.15 p/therm.

On Monday, the contract fell bellow U.S. Henry Hub May futures price for the first time in around 10 years.

“In May, LNG (to Britain) will be strong again with no possibility to cancel cargoes and possibly demand staying weak due to lockdown continuing another 2-3 weeks,” the gas trader said.

The day-ahead gas price at the Dutch TTF hub was down 0.25 euro at 6.00 euros per megawatt hour.

The benchmark Dec-20 EU carbon contract was down 0.91 euro at 20.47 euros per tonne. (Reporting by Ekaterina Kravtsova; editing by Nina Chestney)