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UK GAS: Heavy buying pushes up UK gas prices despite long system

https://www.chemnet.com   Aug 03,2010
Some aggressive buying of the August, September and Winter 10 contracts
by a couple of players in the UK gas market pushed up prices Monday morning
despite bearish signals from a physically well-supplied pipeline network.


The market opened with falling prices. Winter 10, which closed last
Friday at 49.95 pence/therm, was seen as low as about 49.40 p/th, responding
to signs that the market could cope well with the heaviest week of summer
maintenance.


But after some heavy buying started up later in the morning, Winter 10
rose to trade at 51 p/th, falling back slightly to a last trade of around
50.35 p/th at midday London time.


The front-month September traced a similar path, trading as low as 39.75
p/th before rising to 41.80 p/th and last trading at 41.40 p/th by midday.


One trader said there was "no reason" why the market should have picked
up, given that the gas system was long, as exports of UK gas to the Continent
fell back.


The market was coping with "the heaviest week of maintenance" this summer
and some six or seven LNG cargoes were expected into the UK in the next 10
days, the trader said.


Maintenance expected to start in early August included on BP's Unity
riser platform in the North Sea, affecting fields such as Britannia, and on
the St Fergus gas terminal, causing a halt to Norwegian Vesterled flows into
the UK for 20 days.


On the prompt end of the market, UK within-day and day-ahead were around
42.50 p/th at midday, down 0.9 p/th from a 43.40 p/th day-ahead close last
Friday.


At midday system operator National Grid showed the network some 11
million cu m long on gas, with supplies forecast at 213 million cu m against
demand of 202 million cu m.


The key change to demand seemed to be lower exports from the UK through
the Interconnector pipeline to Belgium. Exports were forecast by the pipe's
operator at only 18 million cu m for Monday, down from recent levels of 40-50
million cu m/day.


Real-time flow data showed Norway flowing about 40 million cu m/day into
the UK through the Langeled pipeline. North Sea flows were fairly steady and
all three UK LNG terminals were flowing gas.


Port data shows the Qatari LNG tanker Mesaimeer is due at the South Hook
LNG terminal on Thursday August 5. The Methane Shirley Elisabeth from Trinidad
& Tobago is due at Dragon LNG on Saturday.
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