UK prompt natural gas contracts jumped the most in two weeks as flows declined amid maintenance and continued elevated exports to Belgium. Gas for October gained amid renewed fighting in eastern Ukraine.
Gas for within-day delivery rose as much as 8.4% and next-day fuel added as much as 7%, the most since Sept. 1 for both contracts, broker data on Bloomberg showed. Supply is forecast to fall 15 million cubic meters short of demand, according to National Grid Plc data.
Tensions in Ukraine intensified amid reports of fighting at the Donetsk airport, unconfirmed contents of a Russian convoy and Ukrainian claims that Russia still has troops in its territory more than a week after a cease-fire was declared. Pipelines crossing Ukraine carry Russian gas meeting about 15% of European Union demand.
“Prompt contracts have opened substantially higher this morning on the back of an extremely undersupplied system,” Wingas UK said in a report. “With ample storage stock levels at present, such supply shortfalls can be met, and thus prices on the prompt are presently capped. However, the fragile cease- fire in Ukraine is still adding uncertainty to contracts further out.”
Flows into the system were at 142 million cubic meters compared with the 10-day average of 162 million cubic meters, the grid data showed. Maintenance at the Bacton Shell terminal in eastern England continued after starting at the weekend, with flows at 4 million cubic meters, against the 10-day average of 10.9 million, the grid data show.
Same-day gas traded at the day’s high of 49 pence a therm by 12:20 p.m. in London, broker data showed. Gas for next-day delivery was at 48 pence a therm and earlier reached 48.2 pence.
Exports to Belgium were nominated at 25 million cubic meters, above the 10-day average of 17.3 million cubic meters. That led to “tighter system dynamics,” Wingas said.
UK demand is forecast at 170 million cubic meters compared with expected flows of 154.6 million cubic meters, National Grid data showed.
Front-month gas rose 4.1% to 51.64 pence a therm on ICE Futures Europe in London, paring an advance of as much as 4.6%. Winter gas, for delivery for the six months from October, added 1.4 percent to 60.9 pence a therm on ICE.
“Geopolitical drivers have been the main factor behind price movement and volatility in the two weeks, with prices — particularly those for the coming winter — increasing given the ongoing developments in eastern Ukraine,” Craig Lowrey, a consultant at Ipswich, England-based UX Energy Services, wrote in a note today.
The Donetsk airport in eastern Ukraine was shelled from the east and south on Sept. 13 in two rebel attacks that were repelled, and troops were also shelled in the Luhansk region, a military spokesman said. The US is concerned about renewed fighting and has no details about the content of a Russian convoy that entered and left Ukraine over the weekend, a US State Department official said.
With Ukraine receiving no Russian gas almost two weeks before the winter season starts, Russia warned Europe in a meeting of energy chiefs today there’s a risk Ukraine might siphon off supplies if the former Soviet allies are unable to resolve a payment dispute that’s been brewing all summer. Russia won’t be able to take part in three-way gas talks in Berlin Sept. 20, as offered by the EU earlier, Olga Golant, a spokesman for the nation’s Energy Ministry, said by phone today.
Disputes between Russia and Ukraine over gas prices disrupted EU-bound flows in periods of winter peak demand in 2006 and 2009.
Poland last week reported lower gas flows from Russian compared with its requests as Moscow-based OAO Gazprom said it was still injecting gas in domestic storage and would send as much fuel for exports as its available resources would permit. Two-week flows are “only slightly” below order, Polish Economy Minister Janusz Piechocinski said in Warsaw today.
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