EU gas traders turn bullish on higher heating demand, fewer LNG imports

By KELLY GILBLOM and ISIS ALMEIDA
Bloomberg

European natural gas traders turned bullish for the first time since April as cooler weather is set to boost demand amid lower imports of liquefied natural gas (LNG).

Six out of 13 traders, analysts and brokers surveyed said they were bullish on front-month UK and Dutch natural gas prices, four were bearish and three held a neutral view. That reverses a bearish view that began April 24.

Temperatures across Europe are forecast to be lower than average this month, potentially boosting demand for heating, according to six of eight meteorologists surveyed by Bloomberg. European Union imports of LNG will drop in the fourth quarter amid strong demand in the Middle East and delays to projects in Australia, Energy Aspects, a London-based consultant, said in an Aug. 26 report.

There is “further upside” to residential, commercial and industrial demand “on the back of a drop in temperatures,” said Wayne Bryan, a senior analyst at Alfa Energy Group in London. LNG send-outs are also falling, he said.

Prices Rise

UK gas for next-month delivery on the National Balancing Point hub rose 2% this week on the ICE Futures Europe exchange, heading for a second weekly gain. Prices climbed 0.4% by 10:41 a.m. London time Thursday to 41.69 pence/therm ($6.4/MMBtu). Dutch fuel increased 2% this week to 19.55 euros a megawatt-hour on the Title Transfer Facility hub, also heading for a second weekly gain, broker data compiled by Bloomberg showed.

Temperatures in the UK will average 14-degrees Celsius (57-degrees Fahrenheit) next week, 0.8 degrees below the seasonal norm, according to WSI Corp. data using the GFS model at 4:25 a.m. EU LNG imports will fall 600,000 metric tons in the fourth quarter, Energy Aspects forecasts. The 28-member nation bloc will bring in 2.4 million additional tons of LNG in 2015, down from a previous forecast for a 5.4 million-ton increase.

Maintenance at Centrica’s North Morecambe field starting Thursday will limit supplies. In Norway, the Kollsnes gas processing plant will have maintenance from Sept. 7, while the BBL pipeline from the Netherlands to the UK will close Sept. 6 to Sept. 9.

North Sea maintenance “will lower flows into Barrow and Morecambe,” said Bryan. “Higher exports and the pound weakness are only adding to the bullish outlook.”

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