The traditional contango of the UK natural gas curve has smoothed out in recent weeks, with summer seasons now at parity and the winters either on a par or even dipping into backwardation. Tom Woolley investigates the trend and its likely impact on consumers
The UK gas curve was in steep contango earlier in the summer, with products at the back end holding a sizeable premium over those for more immediate delivery, a trend that counterparties are used to seeing. Summer 2016 for instance - the six month contract period running from April through to the end of September - was assessed at 73.16p/therm at the start of August, marking a hefty 7.37p/therm uplift on top of Summer 2012, traded at the Ice Futures Europe exchange.
Fast forward to the last available settlement in November, however, and that spread has narrowed considerably. The seasons have lost value across the board since early August, although the sell-off has been notably more pronounced at the far end of the pricing curve, in effect eradicating the market's normal contango.