UK Gas prices eases as Langeled supply return to normal

On Tuesday, July 6th, UK gas prices rose after an unexpected sharp drop in the supply from Norway through the Langeled pipeline.  But thankfully early on Wednesday Langeled supply rose to its average flow and gas prices eased across the board.

Out of the blue gas imports from Norway dropped to around 20 mcm/day (million cubic meters) on Tuesday morning and the continuing lack of LNG (liquefied natural gas) to compensate made gas prices rise to 50.70 pence per therm by 10:40 GMT, off earlier highs of 51.50 and compared with 49.40 pence paid for gas to be delivered on Tuesday in the previous session.

“The market hasn’t gone nuts because people don’t believe the gas is going to be turned down for too long,” one gas broker said.

The gas broker’s predictions were correct as Langeled flows rose to 38 mcm/day at 22:00 GMT on Tuesday.  Gas prices for delivery on Thursday fell to 48.50 pence per therm at 09:00 GMT on Wednesday, well below the day-ahead contract high reached in the previous session.

“The market doesn’t like big amounts of movement,” stated an energy broker, referring to the downward corrections seen on the UK’s gas curve on Wednesday.

The front-month August contract, who determines whether to send LNG cargoes to Britain, fell 0.40 pence and was traded at 48.60 pence per therm ($7.39 per mmbtu).  Such fluctuations in natural gas prices are a clear signal that we need LNG and three more LNG ships are expected to arrive in the UK between now and July 23rd.

UK natural gas has rallied 38% in the first half of 2010, but may ease off as European gas stocks refill and supplies recover.

In the over-the-counter power market, prices were stable despite rising fuel prices for so many of Britain’s power plants and strong imports from France early on Wednesday helped counter balance the impact from increased gas prices.

The day-ahead power price was last dealt at £44.50 per megawatt hour (MWh), slightly above Tuesday’s trading level of £44.00 to £44.25 per MWh.

“Domestic demand is not a factor at the moment, the production and supply side is more important, such as problems with peaking plants,” said an energy broker.

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