Wednesday, 29 September 2010

U.K. Natural Gas Advances on Continental Demand; Power Gains - Bloomberg

U.K. forward natural gas prices rose on signs that continued demand from the European continent for the fuel may keep the British market undersupplied through at least November. Electricity prices in Britain also advanced.

Gas for delivery next month rose as much as 0.90 pence, or 2 percent, to 46.60 pence a therm, according to Bloomberg data compiled by Bloomberg. That’s equal to $7.37 a million British thermal units. A therm is 100,000 Btus.

Demand for fuel in Europe through the Interconnector pipeline from the U.K. to Belgium will “remain strong” at the same time as storage operators are reluctant to withdraw until January, potentially making the U.K. gas market undersupplied until December, Deutsche Bank AG analysts Michael Hsueh and Mark Lewis said yesterday in an e-mailed report.

Sustained Qatari liquefied natural gas imports, Norwegian imports and the start of withdrawals from Centrica Plc.’s Rough gas store will boost supplies in the first quarter of next year, they said.

“While upside risks remain in the fourth quarter, we believe there is significant downside in the first quarter,” the analysts said.

Gas also gained as crude oil advanced, following reports of an increase in Chinese manufacturing and a decline in U.S. supplies that bolstered speculation fuel demand in the world’s two biggest energy consumers will rise. Brent crude for November settlement gained as much as 1.1 percent to $79.59 a barrel on the London-based ICE Futures Europe exchange.

Most gas sold by producers such as OAO Gazprom and Statoil ASA in mainland Europe is linked to the price of oil. These costs feed into Britain through physical links to the U.K. market via pipelines from Belgium and the Netherlands.

U.K. electricity prices tracked the higher natural gas market. Next-month power prices rose to their highest since July 16, advancing as much as 1.3 percent to 43.30 pounds a megawatt hour. Bloomberg tracks over-the-counter prices by brokers including Spectron Group Ltd. and ICAP Plc.

To contact the reporter on this story: Lars Paulsson in London at

To contact the editor responsible for this story: Stephen Voss at

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