UK forward month gas price averaged 12% higher in June than in May

UK prices for delivery over the gas year--starting this October--averaged 52p/th in June, 12% higher than they had been in May, according to Platts' data. While the winter showed the most dramatic rise in prices, the summer and following winter were also strong.

At the end of June, next summer was trading around 40p/th for the six-month strip, a price that has been seen on out-turn only one or two days in the UK this summer so far. That was when an outage of the Forties pipeline took out about a quarter of supplies for a few days, as that piece of infrastructure carries gas from some big fields. At the start of June it was 34.38p/th.

The winter--starting in October 2006--began the month at 53.80p/th and ended it 10p/th higher than that. Winter 2007 rose 8p/th in June to close at 55.80p/th.

However, some end-users and consultants point out that there is no fundamental reason for next winter prices to remain as high as they are, although they might well spike to those levels on days of exceptional demand or when storage is running out. So they are expecting a very sharp correction, by no later than September when the prompt price meets the winter, and perhaps a lot earlier. At the end of June there was a 17p/th bridge between September and Q4 05, but while September kept its value throughout June, Q4 was stronger at the end than at the start.

Year on year, prompt prices were up by around 40%. Platts' assessments of prices at the National Balancing Point were stronger for all contracts in June compared with the previous year, although the near-term contracts were cheaper than in May owing to the lower demand in June and July than in May.

The average day-ahead price in June was 28.69p/th, 44% more expensive than a year ago, and the average forward-month price (July) was 27.80p/th, 35% more expensive. On the basis of volume-weighted averages, the July contract was 27.8339p/th, with 137 reported trades for a total 4,375,000th/d. Last year was itself a record for summer gas prices.

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Created: July 11, 2005

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