Gas price plummets 31% from last year

The average price of gas on the UK’s wholesale gas market last month scraped lows which are 31% below the levels seen last year, intensifying the most bearish run seen on the UK gas market in years.

The trend began in January this year as low temperature-driven demand left gas storage stocks unusually high and market prices unusually low. The net result for many of Europe’s energy companies, including Centrica, was weaker than expected financial statements for the first quarter.

Price data from markets specialist Platts shows that the price of gas traded for delivery the next day hit lows not seen in 4 years at 43.50 pence a therm in May. The average price over last month was 45.32 p/th, which is 9% lower than the April 2014 average.

“The bearish trend on the UK’s NBP gas market continued throughout May against the ongoing backdrop of healthy [gas] storage levels and steady Qatari LNG deliveries,” Platts said, adding that gas prices reached their lowest levels since September 2010.

But gas prices slumped faster than electricity prices, the data showed.

In May electricity bought and sold for next day delivery was priced on average 17% below where power prices were seen at the same time last year.

The average power price for near-term delivery in May was GBP39.83/MWh, just 3% lower than the previous month, Platts price data shows.

Analysts at Thompson Reuters Point Carbon expect that June and July could see more limited supplies help stem the recent steady losses. Lower LNG deliveries are expected for July, and a planned maintenance outage for the pipeline connecting European gas supplies to the UK is set for June, a recent market summary shows.

But overall the picture remains bearish.

UK gas storage stocks are currently 72% full, compared to only 31% at the same time last year, meaning there is far less demand for gas to inject into storage this year.

“It’ll be interesting to see how far things could fall,” a UK trader said.