British wholesale natural gas prices dropped yesterday as Russian gas to Western Europe continued to flow through Ukraine despite an export halt by Moscow since Monday and a pipeline explosion on Tuesday.
Gas prices for delivery the next day were trading at 40.40 per pence at 0830 GMT yesterday, down 0.4 pence since Tuesday.
Traders said the price falls were largely a reaction to low demand.
“The weather’s going to be slightly above or around the seasonal norm for most of the month, and with June traditionally seeing some of the year’s lowest demand, this means that gas use will be low for the next weeks,” one gas trader said.
The price drops came despite an undersupplied system and the crisis in Ukraine.
Britain’s gas demand was expected to be 183.5 million cubic metres (mcm) yesterday, according to data from National Grid, and with supply seen at around 170 mcm, the system would be 13.5 mcm undersupplied.
At the same time the crisis in Ukraine, an important transit route for Russian gas exports to the European Union, continued.
Russia’s state-controlled Gazprom halted flows to Ukraine on Monday over a dispute on gas pricing and unpaid debt, and on Tuesday one of the main pipelines through Ukraine was hit by an explosion which Kiev said was caused by a bomb.
Despite Moscow’s export halt and the explosion, natural gas flows from Ukraine to the European Union through Slovakia were running normally, Slovak pipeline operator Eustream said. “Ukraine has over 12 billion cubic metres of gas in storage, so it will be able to meet its transit obligations to Europe for some time,” another gas trader said.
“Additionally, Britain’s and Western Europe’s gas storages are well filled, so Russia’s export halt will take some time before it seriously impacts the EU,” he added.
Britain’s gas storage facilities are currently filled to an average of almost 80 per cent, compared with under 30 per cent this time last year, according to data from Gas Infrastructure Europe, and German storage facilities are filled to over 75 per cent, compared to around 30 per cent in June 2013.
British gas prices for delivery next winter, when an ongoing Russian export halt would hit Europe hardest, were trading at 60.25 pence per therm, down 0.4 pence since Tuesday’s close.