UK forward month gas prices rise 9.2% in July

After the steady climb in forward prices that began in March, there was an abrupt fall over a couple of days that wiped out some of the gains. After a few false starts prices started to rise once more.

Gas prices for delivery in the front gas year -- October 2005 to September 2006 -- rose by 9.2% in July compared with June, Platts figures show. The cost of this contract averaged 57p/th over the month, which is 86% more expensive than it was this time last year.

The high level puts a question-mark over UK industrial demand this winter, as some industrial users have said that manufacturing certain energy-intensive products is not economic when gas costs that much more than it does in continental Europe or in the US. One end-user who had to buy a year of gas from August without wanting to lock in a price above 55p/th agreed with his supplier to buy August and September at a commodity price of 32.7p/th and 33.8p/th respectively. He hopes to get the rest of the year’s supply of gas at lower prices than available today.

The day-ahead price in July was very similar to June’s, at 29.09p/th on the average of the mid-point of assessments. This was despite the cheap fortnight when Interconnector did not flow this year. July’s forward month price (August) was 32.72p/th, 17.7% higher than the forward month was in June, as August is the month of a number of large field outages, including Morecambe Bay, Elgin/Franklin and Britannia. On a volume-weighted average basis using trades reported to Platts, the price was 32.7954, based on 68 trades. At 59.95p/th, Q4 in July was about double the average price of Q3 in June. The front summer and the following winter both gained about 3p/th over the course of the month, with summer reaching 44.5p/th and winter 06 reaching 69.50p/th.

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