U.K. Gas Has Longest Monthly Losing Streak Since 2000 on Storage

Apr 30, 2014 11:47 am ET

April 30 (Bloomberg) -- U.K. natural gas fell to its lowest level since October 2011, extending its longest monthly declining streak in at least 13 years, as above-average storage levels and mild weather offset concern about supply via Ukraine.

Day-ahead gas weakened as much as 3.1 percent, according to data from Marex Spectron Group Ltd. The benchmark European contract has lost 9.6 percent since March 31 in its fifth monthly drop, the longest declining streak since Bloomberg began compiling the Marex Spectron data in July 2000.

Western Europe may see a sixth month with warmer-than-usual weather in May after the mildest winter in Europe in seven years left storage facilities more than half full after just one of the six months when inventories are usually replenished. Russia’s OAO Gazprom has demanded billions of dollars in back payments for gas from Ukraine, threatening to cut supplies if non-payment continues and raising concern that flows to Europe would halt as they did in previous conflicts in 2006 and 2009.

“The risk is somewhat evaporating given we have seen some physical violence but no real escalation in boots on the ground,” Nick Campbell, an analyst at Inspired Energy Plc in Kirkham, England, said today by e-mail. “We have ample supply.”

Day-ahead gas fell as low as 46.4 pence a therm ($7.84 a million British thermal units) at 4:30 p.m. London time, the Marex Spectron data show. Gas for June slipped 2.7 percent to 46.2 pence on the ICE Futures Europe exchange, the lowest for a front-month contract since Nov. 11, 2010. Winter gas, for the six months from October, weakened 1.2 percent to 62.9 pence.

Low Demand

European storage sites were 51 percent full compared with 24 percent at the same time last year, according to data from Gas Infrastructure Europe, a lobby group in Brussels.

Demand in the U.K., the region’s biggest gas market, in the 24-hour period to 6 a.m. tomorrow was forecast at 205 million cubic meters (7.3 billion cubic feet), compared with a seasonal norm of 225 million, according to National Grid Plc. Flows into Britain’s network slipped to 202 million cubic meters, below a 10-day average of 207 million.

Four out of six meteorologists polled by Bloomberg expect temperatures in May in Western Europe to be above the norm with the warmest week expected from May 12, according to Reading- based forecaster MetraWeather.

Dutch gas for May delivery on the Title Transfer Facility hub fell as much as 3.1 percent to 19 euros a megawatt-hour, the lowest for a front-month contract since Nov. 12, 2010, broker data show. High storage levels, reduced demand and the low probability of a supply cut from Russia will mean lower prices, according to ABN Amro Group NV, the third-biggest bank in the Netherlands, which cut its 2014 average price forecast to 23 euros from 27 euros in a report e-mailed today.

Travel Bans

The EU added Russian Deputy Premier Dmitry Kozak to a list of people facing travel bans and asset freezes along with others including pro-Russian separatist leaders, according to a statement yesterday in the EU’s Official Journal. The U.S. on April 28 targeted seven people, including Kozak and Igor Sechin, the head of state-run oil producer OAO Rosneft, and 17 companies linked to President Vladimir Putin allies.

Russia has no military or special forces in Ukraine, Putin said in Minsk, Belarus, late yesterday. Ukraine’s Foreign Minister Andriy Deshchytsia accused his eastern neighbor of undertaking a “covert occupation” of the country’s eastern territories. The EU, Russia and Ukraine plan to hold gas talks in Warsaw on May 2, the European Commission said today.

“Even if the situation escalates further, and more sanctions are implemented against Russia, we still believe that a full Iran-style energy blockade is unlikely, as the EU imports around 30% of its energy needs from Russia,” said Hans van Cleef, an energy economist at ABN Amro in Amsterdam.

--With assistance from Julia Mengewein in Frankfurt.