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04/11
U.K. Gas for Winter Rises to 21-Month High as Crude Advances
By Ben Farey
March 7 (Bloomberg) — U.K. natural gas for delivery next winter climbed to its highest in more than 21 months after Brent crude rose amid concern that escalating violence in Libya may spread through the Middle East.
Gas for winter, the six months from October, rose as much as 2.6 pence, or 2.8 percent, to 69.5 pence a therm, its highest price since May 2009, according to broker prices compiled by Bloomberg. It was at 68.8 pence as of 4:30 p.m. in London. That’s equal to $11.11 a million British thermal units. The summer contract gained as much as 2.82 pence to 59.7 pence.
Global natural-gas supplies could be reduced by about 3 percent if production cuts in Libya spread to other producing nations in the Middle East, Goldman Sachs Group Inc. said in a report dated yesterday.
“The potential disruptions of gas production in countries currently under social unrest are significant,” said the Goldman analysts led by London-based Samantha Dart. “U.K. natural gas markets are not currently pricing in any meaningful way the risk of near-term physical shortages.”
Algeria, the third-largest gas supplier to Europe, produces 2.7 percent of global gas and exports more than 60 percent via pipelines to Italy and Spain or as liquefied natural gas to global markets, the analysts said.
Demonstrations against poverty and autocratic rule have spread to countries including Oman, Algeria and Yemen, increasing uncertainty about future oil and gas production in exporting countries.
Libya, Brent
Libya halted gas exports to Italy on Feb. 22 and more than half the country’s oil production is shut in, according to the International Energy Agency. Italy is importing more Russian gas to make up for the shortfall, Snam Rete Gas SpA data show.
Brent oil for April climbed as much as $2.53, or 2.2 percent, to $118.50 a barrel today on London’s ICE Futures Europe exchange. Higher oil costs push up some mainland European gas contracts and affect prices in the U.K. because of pipeline connections to Europe.
National Grid Plc forecast gas demand at 332 million cubic meters in the 24 hours through 6 a.m. London time tomorrow, about 11 million less than normal for the time of year. The nation’s pipelines will hold 352 million cubic meters of gas at that time, about 2 million more than at the start of today.
Gas for same-day delivery rose 1.8 pence to 59.8 pence.
–Editors: Rob Verdonck, Raj Rajendran
To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net
To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net