Wednesday, 16 March 2011
European Gas Rises After Japan Quake, German Reactor Decision
March 15 (Bloomberg) -- European gas prices advanced on speculation that Japan will buy more liquefied natural gas to make up for lost nuclear generation while Germany said it will halt its seven oldest reactors.
“There will be some increase in LNG demand from Japan,” Jonathan Stern, director of gas research at the Oxford Institute for Energy Studies, said today at a conference in Doha, Qatar. Japan may import as much as 10 million metric tons a year more of the fuel because of the earthquake, he said.
Gas for next winter in the U.K., Europe’s biggest consumer, rose as much as 2.8 percent to 74.95 pence a therm, the highest since November 2008, according to broker prices. The contract was at 73.85 pence as of 4:30 p.m. in London, equal to $11.88 per million British thermal units.
The March 11 quake and tsunami, which left 1.3 million people without power and halted 11 reactors, will prompt Asia’s second-largest economy to turn to alternative fuel sources, driving up prices as it competes with other importer nations for spot supplies. Japan is the biggest user of LNG, accounting for about 35 percent of global trade in 2009, BP Plc statistics show. Britain is Europe’s fastest-growing major gas importer as it turns to sea-going gas tankers to make up for declining North Sea fields.
‘Market Will Refocus’
“Although the current short-term market focus is on the Japanese power industry, we think the market will refocus, given reduced emphasis of LNG in the North American market of late,” Barclays Plc analysts including James Crandell in New York said in an e-mailed report. “The event should have a much larger effect on National Balancing Point prices, which trade in the vicinity of LNG spot price levels as opposed to Henry Hub, which is still discounted steeply.”
The U.K. winter contract at the NBP, Britain’s gas hub, has gained 11 percent since the earthquake halted nuclear reactors in Japan. Higher forward prices boosted gas for so-called prompt delivery. The next-week contract rose 4 percent to 65 pence a therm. Gas for today climbed 1.5 percent to 64.95 pence.
U.K. natural-gas futures on the ICE Futures Europe exchange climbed to a record volume yesterday, the bourse said in an e- mailed statement. The exchange handled 56,380 contracts, up from a previous record of 49,680 in July, it said.
Royal Dutch Shell Plc’s Chief Executive Officer Peter Voser said Shell will send extra supplies of LNG to Japan to help make up for lost nuclear power following the earthquake.
Bank of America Merrill Lynch said Japan’s LNG purchases may rise 7.1 million metric tons a year.
LNG Spot Market
“Global LNG markets will likely tighten after this event as Japan imports LNG to replace the nuclear power lost, suggesting that spot gas prices linked to LNG, primarily U.K. NBP and Zeebrugge, could trend higher over the next few months,” Merrill said today in a report.
National Grid Plc forecast gas demand in the U.K. at 296 million cubic meters in the 24 hours through 6 a.m. London time tomorrow, about 37 million less than the seasonal norm.
“When we get toward June, July, that’s the summer months in Japan, peak air-conditioning demand, and we might see a dramatic increase then,” Stern of the Oxford Institute said.
Germany will halt all nuclear power plants that began operation before the end of 1980 while officials conduct a three-month nuclear safety review, Chancellor Angela Merkel said at a news conference in Berlin. The closure of the seven oldest rectors boosted gas prices further across European hubs.
German Prices Rise
Front-month gas at Germany’s NCG gas hub, the most liquid trading point in the country, rose to its highest since January 2009, climbing 2.8 percent to 26.10 euros ($36.35) a megawatt- hour.
Ratingen-based Netconnect Germany operates the hub for E.ON AG and four other pipeline owners.
Gas prices in the Netherlands also advanced. Summer gas at the Title Transfer Facility, the Dutch hub, rose as much as 3.1 percent to 26.35 euros a megawatt-hour. That’s a record for the 2011 contract and the highest since October 2008.
Extra Qatari supply for Japan is likely to mean less for Europe, particularly the U.K., Stern said. British gas prices may increase by $1 a million Btu as a result, he said.

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