(Bloomberg) -- Natural gas prices in Britain this month have commanded the widest premium over the European benchmark since the end of 2021, underscoring the nation’s vulnerability during cold weather in the absence of large storage sites.
Futures on the UK’s National Balancing Point hub added as much as 1.5% on Wednesday, trading near the highest level since last year. Prompt prices have risen more than 15% so far in November.
UK futures are normally cheaper than the benchmark in Amsterdam during summer, but sometimes flip to a premium during winter to attract extra supply. This year, the trend is being amplified by a colder-than-usual start to the season and windless weather earlier this month.
Britain largely depends on flows from its continental shelf, Norway, and liquefied natural gas producers around the world, as it lacks the large storage facilities that are used in mainland Europe.
Forecast demand for gas in the UK on Wednesday jumped to the highest since January and above seasonal norms, grid data show. Temperatures are expected to drop below average until at least the end of this week, increasing heating needs.
As a result, Britain has become the main destination for diverted LNG cargoes amid higher prices in the region. At least four out of seven vessels that have recently changed course toward Europe are heading to UK ports, according to ship-tracking data compiled by Bloomberg and information provider Kpler.
Six LNG shipments have arrived in the UK so far in November, with a further eight currently under way scheduled to unload at British terminals later over the next two weeks, according to ship-tracking data compiled by Bloomberg and port data. The UK has secured an additional cargo for Nov. 24, Inspired Plc said in a note.
Still, risks abound, including uncertainty over remaining Russian gas flows via Ukraine, and how expensive it will be for Central European nations to secure LNG as an alternative if the transit via Ukraine stops Jan. 1.
Read: Equinor CFO Sees Tight European Gas Market Going Into Winter
UK front-month futures advanced 1.2% to 116.30 pence a therm. Dutch front-month futures, Europe’s gas benchmark, rose 1.5% to €46.38 a megawatt-hour at 1 p.m. in Amsterdam.
--With assistance from Elena Mazneva.
©2024 Bloomberg L.P.