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UK GAS-Prompt prices fall on oversupplied system, wind surge

Fri, 5th Aug 2016 10:09

* UK gas system oversupplied by 59 mcm/day

* Wind power expected to surge on Saturday

* Norwegian flows steady despite Vesterled maintenance

Aug 5 (Reuters) - British wholesale gas prices fell on Friday in response to an oversupplied system and an expected surge in wind power output, despite ongoing maintenance on the UK continental shelf.

Gas for immediate delivery fell 0.15 pence to 34.25 pence per therm by 0830 GMT, while prices for Monday fell 0.6 pence to 34.15 pence/therm.

"Prompt prices have opened the session lower, on the comfortably supplied system despite the fall in UK continental shelf (UKCS) production weighing on prices for the coming weeks," one UK-based trader said.

The UK gas system was 59 million cubic metres (mcm) oversupplied, with flows at 208 mcm/day and demand forecast to be 149 mcm.

The oversupply is despite ongoing heavy maintenance on the UKCS, with flows into St Fergus Mobil terminal falling to zero compared to normal flows around 20 mcm/day.

"We're long at the moment because of storage withdrawals too, which I'd expect to be lower over the weekend," the trader said, referring to the oversupply.

Flows through the Vesterled pipeline, one of Norway's export routes to Britain, also dropped to zero on Friday morning due to a planned one-day maintenance.

This, however, was offset by a similar increase in flows via the Langeled pipeline, putting total Norwegian deliveries unchanged from the previous day.

Meanwhile, wind power output expected to peak to 5.8 GW on Saturday from 1.8 GW on Friday, reducing demand for gas, due to unseasonably windy weather, with gales expected in the far northwest.

The weather is forecast to remain unsettled and windy across northern parts on Sunday and Monday, the Met Office said.

There were no confirmed liquefied natural gas (LNG) deliveries, though there might be one-two tankers potentially arriving in Britain by around mid-August, gas market analysts at Thomson Reuters said.

If those deliveries do not materialise, LNG supply from UK terminals will have to drop from the current 22 mcm/day rate, they added.

Lower LNG receipts could be the result of higher Northeast Asian LNG demand pulling Qatari gas away from Britain due to hotter than average weather boosting cooling demand in Japan, London-based consultancy Energy Aspects said.

NBP prompt prices could continue to find support if the slowdown in UK LNG receipts is sustained, however the holiday season and rising gas stocks in Europe could reduce demand on the Continent, it said.

Further along the curve, the contract for gas delivery next-month, was at 34.70 pence/therm, 0.45 pence or 1.28 percent lower.

Dutch day-ahead gas prices at the TTF hub fell 0.15 euro or 1.1 percent to 13.20 euro/MWh.

In the European carbon market, front-year allowances eased 0.03 euro to 4.67 euro a tonne. (Reporting by Nerijus Adomaitis in Oslo. Editing by Jane Merriman)

(c) Copyright Thomson Reuters 2016. Click For Restrictions - http://about.reuters.com/fulllegal.asp

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