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NBP Within-day hits £1.50/th as Interconnector gas pipe breaks down

22 Mar 2013 12:09:48 | esgm

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The British NBP Within-day gas contract hit £1.50/th (€1.76/th) and Day-ahead traded up to £1.20/th on Friday morning as an unplanned outage on the Inteconnector drove British prompt prices up to fresh winter highs.

By 11:00 London time the British Day-ahead contract had jumped by 16.525p/th to £1.14/th or €45.693/MWh, although the bid/offer spread was quoted as wide at 12p/th by some traders in the morning.

IUK, the company that operates the Interconnector pipe, said full capacity was unlikely to be available before late afternoon.

By midday, flows into the Britain had restarted at a rate of 2 million cubic metres (mcm)/day. They had initially stopped soon after 07:00.

Interconnector and IUK put out several updates explaining that nominated volumes would not be shipped on Friday. The pipe suffered from a water/glycol pump failure at Bacton. Daily nominations stood at 66 mcm early in the morning and were down to 63mcm by 11:00.

The NBP prompt was further cut adrift from mainland European markets and Day-ahead was almost 30p/th more expensive than the Dutch TTF and 30.50p/th more expensive than the German NCG. The Zeebrugge basis spread, showing the Belgian discount to the UK market, was hard to assess given the discrepancy between bids and offers with the Day-ahead bid around -31p/th and offered around -21p/th.

The price spike came despite a rise in British withdrawals from storage and BBL imports which meant that predicted closing linepack was long throughout the morning.

The NBP Weekend contract hit £1.35/th and WDNW traded at £1.30/th.

The Day-ahead contract has only closed above £1.20/th on eight occasions, each of which was either in November 2005 or March 2006.

The NBP front month climbed by 1.175p/th to 71p/th but the TTF and NCG hubs showed only small increases.

Nominated LNG flows from the Dragon terminal moved from zero to almost 8mcm following the Interconnector outage but there was no change to nominations from Grain and South Hook.

Norwegian flows to the NBP were at close to maximum. The Langeled and Vesterled pipes can flow up to 109mcm/day and on Friday morning the combined rate was almost 107mcm/day.

Continuing cold weather in Britain has kept demand in March well above normal and at a time when British stocks - both of conventional gas and LNG are very low. National Grid data showed the long-range Rough site contained just 250mcm as of Thursday's open. Medium-range sites contained around 180mcm.

National Grid estimated demand of 325mcm on Saturday and 332mcm on Sunday, rising above 340mcm on Monday and Tuesday. This time last year demand was already well below 300mcm/day.

The Zarga LNG vessel will come to South Hook on 25 March with the Tembek to follow on 29 March. South Hook stocks are around 15% full.

The Mekaines is likely to arrive into Grain before the end of the weekend.

There are other LNG vessels around Spain that could be diverted to the UK, although this could depend on the duration of the Interconnector pipe outage and how long NBP prompt prices remain at current levels. Edward Cox

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