British NBP Within-day gas breaks the £3.00/th barrier

British within-day natural gas traded at its highest level in over 20 years on Thursday 1 March 2018, brokered deals seen by ICIS showed.

200,000 therms (th) of NBP Within-day was bought at 350p/th shortly around 14:20 London time.

The previous record was set on 17 December 1997 when brokered trades peaked at 300p/th. System balancing prices reached just above 497p/th on the same day.

Gas deficit

The product began trading at 200p/th after network operator National Grid had issued a system deficit warning at 05:48. A number of outages left supply lagging over 45 million cubic metres (mcm) behind exceptionally high demand.

Within-day fell to an intra-day low of 170p/th at 08:00 before bursting through 300p/th around 14:00 and hitting its OTC record 20 minutes later.

The NBP Day-ahead opened at 102p/th and tracked the Within-day through the session. The contract peaked at 279.5p/th around 14:20 and eventually settled at its highest ever close of 229.75p/th.

Daily consumption was forecasts to exceed 400 million cubic metres (mcm) for the first time since February 2012.

Sub-zero temperatures drove up household demand across the network. Offtake from local distribution zones (LDZ) – a measure for end-user demand – was set to total 356mcm, National Grid data showed.

The stress on the system lead National Grid to implement specialist gas balancing actions on the on-the-day commodity market (OCM) platform. The operator said it was looking buy locational gas – gas for delivery in a specific part of the network – across the system.

National Grid said it would consider Demand Side Response offers, where a large user is paid to reduced offtake from the network.

Soaring prices made gas uncompetitive as a feedstock for power generation, pushing offtake from CCGT lower. Gas’ status as the marginal fuel meant National Grid had to pay gas-fired generators to keep running in order to maintain power margins.

The record prices proved high enough to bring enough supply onto the system. At 15:00 the grid was 2.3mcm long, according National Grid.

Friday

Demand is expecting to drop to 390mcm on Friday before sinking to 340mcm on Saturday.

“Demand tomorrow [looks] a bit lower so prices unlikely to get as high,” Julie Cox, Head of Gas Trading at Energy UK said. She added that Britain will rely heavily on imports from mainland Europe and the risk of outages would remain.

“It looks like a couple of LNG cargoes could come into the market and flows from Belgium should come up again tomorrow. Today was the highest demand day for Britain,” an analyst at a European utility said.

The NBP Day-ahead closed 6p/th above its Belgian Zeebrugge equivalent, which should spur sizeable imports into Britain through the Interconnector.

He added that prices would remain volatile but only more infrastructure outages or a prolonged cold spell until the end of the month would generate the same peaks.

One trader at another utility warned that Friday could be round two. “It’s still snowing, demand will be high through the night. Heating demand tomorrow will be sky high.”

Outages

Cold weather preyed on northwest Europe’s ageing infrastructure for the second day in a row on Thursday.

Gas supply from Norway continued to suffer as a result of an outage at the Kollnes processing plant, offshore operator Gassco said. Norwegian volumes flowed to Britain via the Entry SEGAL Pipeline System dropped by 18mcm/day after the network was hit by cold-related process problems late on Wednesday. Issues could last up to four days.

Domestic offshore production on the UK continental shelf (UKCS) into the grid was hampered for the second consecutive day. Flows into the Bacton terminal were slashed on Wednesday and Thursday due to issues at all three of its sub-terminals, operators Total, Perenco and Shell said, as was throughput from Irish Sea fields in Morecambe Bay

Flows from the Rough facility into Easington ceased on Thursday. Rough was Britain’s largest storage site but was converted into field in January,

Output from Britain’s remaining stores were running close to capacity for the fourth consecutive day. Total inventories were set to drop 400mcm by the end of the gas day.

Send-out from the South Hook LNG terminal to the grid slid to zero around 05:30, but normal operations resumed at 06:55, operator South Hook Gas said.

LNG

Send-out from Britain’s three LNG terminals – South Hook, Dragon and Isle of Grain – hit multi-year highs in response to the soaring prices. Combined flows into the network exceeded 65mcm/day for the first time since 2015 on Wednesday. Afternoon nominations suggested the terminals would supply more than 50mcm on Thursday.

The equivalent of 429mcm – 31% of total capacity – of pipeline gas sat in the three terminals on Wednesday, latest data from National Grid showed.

Shippers were likely selling LNG terminal stocks and gas storage inventories to take advantage of spiralling day-ahead and within-day prices, before bringing in cargoes to restock positions at a later date.

Dragon is expected to receive a cargo in the near future, sources said. The origin and exact arrival date of the vessel could not be confirmed.

“We might see some people bringing in LNG at above hub prices in order to refill LNG terminal tanks if levels are empty,” one trader said this week. thomas.rodgers@icis.com