European Natural Gas Prices Steady Despite Libya Disruption

LONDON (Dow Jones)--European natural gas prices are steady Wednesday, and traders said the market has plenty of spare supply to make up for disruptions to exports from Libya.

"There is no shortage in the market in the short-term, and actual fundamental flow reductions are more of a localized issue," namely in Italy, a German-based trader said.

On Tuesday Eni SpA (E) closed its Greenstream pipeline, which carries gas from Libya and accounts for about 10% of Italy's demand, as the situation in the North African country worsened.

However, Italy's Industry Minister Paolo Romani said Wednesday the country had "no gas problem," adding the country could increase imports from other supply routes, including Algeria, Norway and Russia, as well as from further afield through its two liquefied natural gas terminals.

Elsewhere in Europe the market dismissed the impact of instability in Libya, even as oil prices spiked on the threat to the country's exports. ICE April Brent oil futures are up over 6% since Feb. 18, trading recently at $109.51 a barrel.

However, gas prices on the continent did gain some support from colder weather, sustaining the price of day-ahead gas on the Dutch TTF at EUR22.3 a megawatt hour and the March contract at EUR21.95/MWh, up slightly from the beginning of the week.

In the U.K., the most liquid of the European gas markets and where prices often react to volatility in the cost of coal and oil, prices fell back from highs reached Tuesday. Gas prices tend to reflect volatility in coal and oil futures as these two commodities are used in gas production, but low demand and ample supply still managed to dampen the gas market Wednesday.

"The market is taking a breather and no-one's worried about an under-supply of gas this morning," said a London-based trader.

Earlier Wednesday U.K. utility Centrica PLC (CNA.LN) announced a three-year agreement with Qatargas, the world's largest LNG producer, for delivery of 2.4 million metric tons a year to the U.K.'s Isle of Grain terminal. The deal will provide enough gas to supply around 2.5 million households, according to a statement from Centrica.

At 1420 GMT the price of day-ahead natural gas in the U.K. was 54.6 pence a therm, while the March contract was at 54.25 pence a therm. On Monday, day-ahead gas was at 53.75 pence a therm, while the March contract was at 53.53 pence a therm.

(Source: http://online.wsj.com/article/BT-CO-20110223-710940.html)