LONDON: British wholesale gas prices dropped on Friday afternoon as healthy supply left the system oversupplied, while demand was set to fall next week due to warmer weather.
Gas for immediate delivery fell by 5 percent to 47 pence per therm by 1643 GMT, while the weekend contract was down by 5 percent at 46.50 pence/therm.
The contract for delivery on Monday fell by 4.6 percent to 47.35 pence/therm. Prices slid as oversupply in the gas system rose to 8 mcm, from 4 mcm on Friday morning, due to rising imports from Norway and continental Europe.
Imports from Belgium via the Interconnector pipeline were nominated at over 48 mcm/day, a new high for this winter. Maximum temperatures were expected to rise to 11 degrees Celsius by Wednesday from 8 degrees on Friday, UK Met Office forecasts showed.
Rising temperatures reduce demand for home heating, which accounts for around 40 percent of Britain’s gas use. Britain’s largest underground gas storage site Rough is also expected to resume withdrawal operations from Dec. 9 after an outage that began in June.
Further out on the curve, gas prices for January delivery fell by 4 percent to 46.64 pence per therm, and the next-season contract was down by 1.8 percent at 41.85 pence/therm. Thomson Reuters analysts said supplies should improve in the first quarter of 2017 due to higher deliverers of liquefied natural gas (LNG) from Qatar after Australia ramps up exports to Asia.
“UK continental shelf production should remain stable, with an extra few million cubic metres of production from the Cygnus field, which should start producing by Christmas,” said Cecile Langevin, analyst at Thomson Reuters. In the Netherlands, the day-ahead gas price at the TTF hub was 0.56 euro lower at 17.52 euros per megawatt-hour (MWh).
In the European carbon market, the benchmark Dec. 16 contract fell by 0.16 euro to 4.3 euros a tonne.
