U.K. Gas Prices Jump to Seven-Year High as Belgian Supplies Halt
Comment of the Day

March 22 2013

Commentary by Eoin Treacy

U.K. Gas Prices Jump to Seven-Year High as Belgian Supplies Halt

This article by Matthew Brown for Bloomberg may be of interest to subscribers. Here is a section
The U.K. has become increasingly dependent on imported gas as indigenous production from the North Sea slumped in recent years and the price of liquefied natural gas, or LNG, shipments traded near a record high. Norway was the source of an unprecedented 48 percent of Britain's gas on Dec. 26, data from network operators Gassco AS and National Grid Plc show.

“We are more vulnerable to these types of events than were were five years ago,” Patrick Heather, senior research fellow at The Oxford Institute for Energy Studies, said in a telephone interview. “Something as important as the interconnector is always going to have an impact on prices. With demand at the level it is today, I don't think the U.K. is going to run out of gas.”

Eoin Treacy's view The failure of a water pump at a boiler house in Belgium created a short-term situation where spot prices for UK natural gas surged intraday. The problem was fixed by this afternoon but it exemplifies just how low inventories are and how narrow the margin for error in the supply chain is. The fragility of natural gas supply should frame discourse on the viability of other energy sources such as nuclear, coal, oil and wind.

UK natural gas futures completed a four-month consolidation with a successful break above 70p this morning. A sustained move below 67.5p would be required to question potential for some additional higher to lateral ranging.

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