Bayerngas Norge

Go to content

Our market view - week 44

Released - Last updated


Cold weather pushes UK gas prices higher



UK gas prices experienced a highly volatile week, with sentiment dominated by weather concerns. Temperatures in October have been below normal in the UK and Germany. An expected increase in natural gas demand due to cold weather combined with fears of tight supplies to the British system pushed gas prices higher, despite strong flows of imports of Norwegian gas. Planned maintenance at the Segal system 2-19 November exacerbates supply fears. Low LNG supply is also a key cause for concern. No LNG vessels are currently bound for British ports. One cargo expected to arrive in Britain this week has changed its final destination to Canada.

Prices are expected to remain supported this week. With Norwegian flows via the Langeled pipe already flowing at near full capacity and the Interconnector in import mode, little supply flexibility will be available should cold weather boost gas demand. The return of Qatargas trains 4 and 5 following maintenance could change the tight LNG situation.

Russian gas production is at its lowest level in a decade for October, which is a concern as temperatures in Europe are dropping. Nord Stream flows are low.


Picture: UK gas demand by sector (Source: Reuters)


US East Coast refineries are winding down operations ahead of approaching hurricane Sandy, reducing crude use in the world’s largest oil consumer. The expected build-up in crude stocks weighs on prompt prices. The restart of Britain’s largest oil field, Buzzard, and a recovery in Nigerian crude output after a flood knocked out a fifth of output is also limiting price gains.

The US government reported that the world’s spare oil production capacity outside of Iran rose over the past two months as gasoline demand waned in the US and oil use for power generation fell in the Middle East. This cushion gives room to continue pressuring Tehran over its disputed nuclear programme through sanctions targeting oil revenues. Still, the current level of surplus capacity of 2 mbd is modest by historical standards. The average from 2009-11 was 3.6 mbd. The US and European sanctions have reduced Iran’s exports to around 860 000 bpd from 2.2 mbd in 2011.

Iraqi exports of Basra light are set to hit their highest ever level at 2.53 mbd in November


Brent prices (source: Reuters)