UK gas prices at three year lows, and set to remain weak this summer

The price of natural gas on the UK’s NBP wholesale market is currently at three year lows with weak pricing levels to persist through the coming summer, due to still-healthy storage levels after an unusually mild winter.

In a report on the market outlook for this summer analysts at Thomson Reuters Point Carbon said this week that the UK gas market will remain bearish during the second half of May, June and at the end of July as consumption is forecast to be lower than supply.

Currently, UK gas prices for prompt delivery are almost 30% lower year-on-year, in line with lows not seen since October 2011.

The UK’s gas storage levels are in healthy shape for this time of year meaning there is less demand for gas to be used for storage injection, which will lower the market price for gas.

In addition, over the early months of summer LNG supplies are expected to be healthy before dropping sharply from July in line with an uplift in demand from Asia as temperatures boost electricity demand for air-conditioning.

But by this time UK storage levels will be even higher, the analysts note.

“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,” said analyst Oliver Sanderson.

The analyst said the ample supply within the UK’s gas stocks will keep UK gas prices “substantially below” last year’s level throughout the summer, mitigating the risk posed by political turmoil in Ukraine.

By September Point Carbon estimate that the UK’s storage stocks will have already reached 95%, helping to offset the effect of potentially lower supply availability.

Author: Jillian Ambrose,
Channel: Customers , Markets & Trading
Tags: Gas Import , Gas Storage , Gas Retail , Customer Management

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