Healthy winter gas reserves will ensure low UK prices for the summer, which are already at three year lows, according to Thomson Reuters Point Carbon’s UK Natural Gas Seasonal Outlook for Summer 2014.
- The outlook for the UK gas market appears bearish during the second half of May, June and at the end of July as consumption is forecast to be lower than supply. This will maintain healthy storage levels and keep UK gas prices consistently below most Continental European Hub prices.
- Seasonal storage facilities, such as the Rough gas storage facility, have large volumes left in stock after the mild winter, leading to less demand for gas injection into storage compared to last summer.
- Strong supply of LNG flows to the UK in early summer is expected to drop sharply from July as increased demand for gas in Asia takes effect to fuel the continent’s peak air conditioning season.
- Power company consumption of gas is slow, as cheaper energy sources such as coal and wind energy contribute to keeping the UK gas prices low.
- Exports through the IUK pipeline in mid-summer (driven by lower UK gas prices relative to the continent) will ease in August, as regular maintenance on UK and Norwegian North Sea fields reduces overall gas supply.
- By early September the UK’s largest storage facility, Rough, is forecast to be 95% full, dampening otherwise bullish elements such as less LNG and supply maintenance in August and September.
- UK gas prices are at a three year low, showing the lowest day ahead prices since October 2011, close to 46 p/th (pence per therm) for Day Ahead delivery as compared to 64 p/th at the beginning of May 2013.
Oliver Sanderson, research analyst at Thomson Reuters Point Carbon, commented: “The mild winter of 2013/14 is extending into summer, heavily impacting the UK gas market by keeping stock levels high and pushing prices down as buyers seek best value amid oversupply. Gas fired power generation will continue to be hampered by cheap coal and increasing wind capacity, cutting year on year consumption from already low levels.
“Despite some bullish elements toward the end of the summer such as supply maintenance and less LNG, bearish factors are set to dominate market sentiment, keeping UK gas prices substantially below last year’s level throughout the summer, also diluting the risk coming from political turmoil in Ukraine.”
Source: Thomson Reuters Point Carbon
Edited by Katie Woodward
Read the article online at: https://www.lngindustry.com/liquid-natural-gas/13052014/uk_natural_gas_summer_outlook_578/