British gas demand has been at a seven-year low so far this winter and traders are increasingly bearish over the supply/demand outlook over the next five weeks.
Between 1 October to 17 February, NBP demand averaged just 254 million cubic metres (mcm)/day, the lowest since Winter 2006-07 and down 11% year on year, according to National Grid data.
So far this winter LDZ demand has averaged just 183mcm/day compared with 205mcm/day over the same period one year earlier.
The share of gas in the power generation mix has also dropped a little.
The subdued consumption has left British gas supply - and stocks in particular - much better positioned than many had expected at the end of last summer, when fullness was well below average.
“It is now almost without question that the NBP will finish the [gas] winter comfortably. Considering there are more mild temperatures on the horizon, and the high storage reserves, in our mind it is a virtual certainty,” one trader active on the NBP said.
Strong from the Netherlands, from Norway and domestically, along with the mild weather, have all left substantially higher-than-average volumes of gas in medium-range storage facilities.
On 19 February, medium-range facilities held about 723mcm, more than double what was in store at the same time last year, and about 48% higher than average volumes in store on that day for the past eight years, according to National Grid.
While Centrica’s Rough site held a closer-to-average volume on Wednesday, combined stocks across sites were the fullest since 2007.
“This year there has been a great deal of gas length in mainland Europe, so we have received robust flows from both the BBL and the Langeled,” said Nick Campbell, analyst at Inspired Energy.
“In addition to the mild weather, this is a reflection of the continent turning off gas in power generation,” he added.
Despite the bearish drivers in Britain, NBP Day-ahead has remained at a premium to other key mainland European hubs this winter, which themselves have been oversupplied.
Between 1 October to 20 February, NBP Day-ahead closed at an average premium of 1.308p/th to the same Dutch TTF contract and of 0.779p/th to the German NCG.
BBL, Langeled flows
Higher BBL flows have given a supply boost to the NBP, and show no sign of abating in the coming weeks.
Between 1 October 2013 to 18 February 2014, about 3.94 billion cubic metres (bcm) flowed through the pipe, up 6% on the same period last year.
Combined flows into St Fergus have averaged about 19mcm/day this winter, down just 2mcm/day year on year.
Similarly, while demand has dropped 11% year on year, flows through the Norwegian Langeled pipeline have only fallen by 6%.
But the stronger flows relative to demand have in part had to compensate for lower LNG volumes this winter.
“I think at this stage it is pretty much warranted that we [Britain] will be long in the coming months, with plenty of storage minimising the need to inject in Q2,” said a second trader.
The NBP front summer has not, however, fallen as sharply as winter contracts, but has remained at a tight spread to the prompt. In mainland Europe the front summer has even started to show a strong premium to the prompt. Jack Elliott