UK gas prices eased in late trading after hitting record levels on Tuesday for the second successive session, with traders initially worried that cold weather and the temporary closure of the country’s largest gas storage facility would tighten supply.
Prices began to later eased as the National Grid, the operator of the UK gas network, said it would not repeat Monday’s warning about tight supplies.
Traders said wholesale prices for gas delivered within the day fell to 150p per therm by the close of trade in London, having reached 255p earlier in the day. This intra-day peak was level with the previous day’s peak and represented the highest price since the UK gas market was deregulated in the early 1990s.
UK gas pricesfor day-ahead also fell around 40 per cent, trading at 158p, but still up sharply up on last week’s level when prices were under 100p. However UK gas prices for delivery next week rose by about 20p to 155p as traders were concerned that cold weather and tight supply conditions may continue next week.
“This is just a fear premium that if cold persists there is little or no medium-range storage left,” said one gas trader. Tuesday’s increases came after steep gains on Monday amid concerns about tight supplies.
Gas prices have surged this week on colder-than-normal weather, concerns about production problems in Norway - a key gas exporter to the UK - and depleting gas storage supplies at home. Rough, the UK’s largest natural gas storage facility and holder of most of the country’s long term gas storage, was shut after a fire last month and is not scheduled to open until early May.
National Grid on Monday issued the gas balancing alert for the first time since it started the trigger system last year. The alert, issued when supplies may struggle to meet demand, provides information to the market and enables suppliers and buyers to react.
National Grid said on Tuesday on its website that the level of gas in both short and medium term storage facilities was about nine days of supply if withdrawn at maximum rates.
IPE Brent crude oil for April delivery gained about $1 to $63.18 a barrel in late afternoon London trade after Nigeria warned that it had lost more oil output than previously estimated. April West Texas Intermediate added 43 cents to $62.20 a barrel in early afternoon New York trade.
Edmund Daukoru, the Nigerian energy minister, revised upward the stopped production in Nigeria due to militant attacks by 100,000 barrels a day to 556,000 b/d. US gasoline futures were 7.7 cents to $1.8210 a gallon, and have now risen about 30 per cent in the past month on fears of supply squeezes this summer.
