Here’s a fine example of liquefied natural gas (LNG) arbitrage at work.
While hugely weak fundamentals are doing this to Henry Hub Natgas front-month futures prices :
UK NBP forward market prices were doing this:
Indeed, Tuesday’s Utilyx market report stated:
The UK gas market was down across the board yesterday, with the greatest losses seen on the prompt. The continuing fall extends the 25% loss of the front summer contract since late October and reaches new lifetime contract lows. Further softening was incited by a loss on the US summer shoulder months, shedding just under 0.1 $/mbtu for the April10 contract. National Grid showed the system opened 30mcm long, even with demand at 362 mcm compared to the seasonal normal of 323 mcm. The Bacton Interconnector continues to pump between 10 and 30mcm of gas into the UK from Belgium, meanwhile Langeled flowed healthy and steady flows of 55mcm. Dragon and Isle of Grain flows stepped up yesterday, total LNG flows at 60 mcm. The system gradually balanced to settle with a neutral linepack after flows into Bacton reduced at the end of the day.
And as Bloomberg added on its newswire:
U.K. natural gas for the six months through September 2010 fell to a record low amid ample supplies of the fuel and high levels of gas in storage.
Rough, the U.K.’s biggest gas-storage site, is 99 percent full, National Grid Plc data show. The depleted offshore field holds more gas at this time of year than in the last five years. The U.K. is receiving record volumes of liquefied natural gas from counties such at Qatar, the world’s biggest producer of the fuel. LNG imports into the U.K. have exceeded 1 million tons a month for the first time, according to Inenco Group Ltd.
In other words: A potential natgas glut in the US may diverted to Europe and the UK, thanks to LNG.
Related links:
Doth a global natgas glut come (already)? – FT Alphaville