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UK GAS-Prices hit multi-year lows on oversupply
URGENT BULLETIN Circumstances attributable to the mild winter throughout Europe means that current commercial gas prices in the
UK are at their lowest level for some considerable time. Unfortunately, this is likely to be a very temporary blip whilst the oversupplied system slowly readjusts to seasonal norms.
In stark distinction to this state of affairs the international gas market is also in a state of suspended animation due to the ongoing fallout arising from Russia’s activities in Ukraine. There is a possibility that things will return to normal but any increase in tensions will result in further market volatility.
However, here is the big thing, if you act quickly you can take advantage of the glut and lock in highly advantageous prices now.
Given the balance of risk and opportunity, Touchstone is bringing forward the September 2014 Buying Basket and will be going to tender for gas prices immediately. This could benefit any supplies you currently have with a contract termination date between now and October 2015.
LONDON, June 4 (Reuters)
British spot and forward prices for wholesale natural gas fell to multi-year lows recently as oversupply combined with weak spring demand.
British gas for delivery next winter traded at 59.40 pence per therm in the afternoon, its lowest level since at least the third quarter of 2011, while day-ahead spot gas prices dropped close to four-year lows at 41.50 pence per therm.
“The gas market is completely oversupplied. There’s a lot of gas in storage, a lot of gas in pipelines, a lot of LNG tankers have been coming in and demand is very low because of mild weather, so that’s putting a lot of downward pressure on the market,” one gas trader said.
“If it hadn’t been for the slightly firmer oil market, we’d have seen gas prices fall further still,” he added.
Touchstone have past experience in a similar situation in 2012 when market conditions causeda short term dip in gas prices. Geoff Berry, of the Touchstone pricing team, stated that following the company’s recommendations a number of clients secured extremely attractive rates over the long-term which have been highly beneficial to the businesses concerned.
He stated that “In the current situation a window has opened up ahead of the usual summer pricing round where a number of suppliers who have overbought are eager to reduce their positions and are offering highly competitive prices. Once the oversupply has been eliminated then prices will begin to return to normal seasonal levels, albeit with a degree of uncertainty due the geopolitical situation with Ukraine. This is a perfect situation to obtain long term, fixed price rates and thus avoid potential problems in the future. Some suppliers are currently offering 48 months prices.”
Given the balance of risk and benefit there are compelling reasons to initiate the tendering process immediately and Touchstone will be contacting Buying Group Members and Applicants shortly to advise on the best procedure to take advantage of this situation.