LONDON: British wholesale gas prices fell on Thursday morning, wiping out gains made earlier this week, as supply concerns eased and strong imports and reduced demand created an oversupplied system. Within-day gas price dropped by 11.00 pence or 16 percent to 58.00 pence per therm at 0821 GMT. Day-ahead gas price fell by 2.00 pence to 59.25 p/therm. UK spot gas rose to nearly 100 p/therm on Tuesday, the highest since 2013, after the Forties oil and gas pipeline was shutdown, an explosion at Baumgarten hub, an outage at Norway’s Troll platform and amid higher demand due to freezing temperatures. “We anticipate prices will move lower from here as the supply situation stabilizes and temperatures potentially moderate,” said Barclays analysts. “If weather forecasts suggest more mild temperatures in January, this could result in a quick reversal in prices as a supply surge meets lower demand levels,” they said. “However, these recent events show the UK gas vulnerabilities following the decommissioning of its largest storage facility, Rough.” On Thursday, the system was oversupplied by around 30 million cubic metres (mcm), with flows forecast at 365 mcm/day and demand at 335 mcm, according to National Grid data. Strong imports through the InterconnectorUK pipeline and withdrawals from storage are contributing to oversupply, traders said, coupled with higher wind output which has reduced gas-for-power demand and expectations of slightly higher temperatures next week. The spread between U.S. Henry Hub prices and UK gas reached $6 per million British thermal units (mmBtu), the highest since 2013, but Barclays does not see this as sustainable and continues to forecast a spread of $2.25/mmBtu for 2018. North Sea operator Ineos has declared force majeure on all shipments of crude oil, natural gas and condensates through its Forties pipeline system, according to a source familiar with the matter. The company closed the system, which carries about a third of the UK’s offshore gas output, on Dec. 11 after it discovered a hairline fracture in an onshore section of the pipeline. It has said the system will be closed for at least two weeks. Disrupted volumes are estimated at around 40 mcm/day. However, if the cause of the crack is sulfide corrosion due to the introduction of more sour or higher sulfur Buzzard blend into the crude stream, it would be a “worrisome development”, Barclays said. It might mean most costly or extensive repairs and raise the probability of more frequent pipeline incidents in the coming years, they added. Q1 2018 contract down 1.45 p at 67.75 p/therm. Day-ahead gas price at the Dutch TTF hub down 1.00 euro at 20.50 euros per megawatt-hour. Benchmark Dec-17 EU carbon contract falls 0.11 euro to 6.96 euros per tonne.
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