The escalation of violence in Ukraine and accompanying rise in tensions between the West and Russia saw some upward movements to UK NBP gas prices throughout July, but overall monthly average prices were down from June as the market remained depressed by good supply and high storage levels.
Gas for the benchmark day-ahead contract averaged 37.52 pence/therm in July, which is the lowest monthly average since April 2010 when it fell to 32.80 p/th, and down 5% from June.
It's 43% lower than July 2013's 65.28 p/th.
At July 11, the contract saw its lowest closing price since September 2010. In the following days, however, new sanctions were imposed against Europe's biggest gas supplier, Russia, and the shoot-down July 17 of Malaysia Airlines Flight 17 over Ukraine took geopolitical concerns to a new level.
The contract closed at 41.50 p/th at July 28 -- it's highest close since June 16 -- before easing back to 39.25 p/th at the end of the month. The gains during the second half of July did result in the contract finishing the month's trading higher than where it began, a first for 2014.
The average month-ahead price throughout July was 38.09 p/th, down 6% on-month and 42% on the year.
Gas for delivery during the coming winter hit its lowest ever value during July -- closing July 10 at 54.85 p/th -- since Platts assessments began on the contract in September 2011. In its early days of trading, the contract had been valued in excess of 77.00 p/th. By the end of the month, market jitters stemming from the Ukraine/Russia situation saw it back up to 58.50 p/th.
The UK's National Grid said Thursday that if the crisis were to lead to an interruption of Russian gas flows through Ukraine, the EU could lose 207 million cubic meters/day of supply during the coming winter. To put in context, the UK's demand during the past winter was about 255 million cu m/d.
There is the potential, however, for Russia to re-route gas via the Yamal and Nord Stream pipelines which could reduce the impact to 117 million cu m/d, Grid said.
While the UK doesn't receive significant volumes of gas from Russia, both direct and indirect connections to European markets make it likely that UK gas supplies would change.
UK pipeline imports would fall, piped exports to the Continent would rise, and a boost in LNG tanker deliveries and domestic storage withdrawals would likely be needed to cover the shortfall, it said.
Grid said an initial disruption would lead to the bi-direction UK-Belgium Interconnector pipeline exporting between 20-58 million cu m/d rather than importing anywhere up to 74 million cu m/d if there's no cut to EU-bound Russian flows.
Norwegian flows into the UK would fall from 60-130 million cu m/d to 60-100 million cu m/d, the Dutch BBL pipeline would cut back from 10-45 million cu m/d to 0-30 million cu m/d and LNG imports would have to rise from 8-100 million cu m/d to 8-130 million cu m/d, Grid said.
Gas prices would likely have been more sensitive to the threat if the market wasn't as healthily stocked as it is.
Demand for gas has been comparatively low during 2014 with temperatures at the beginning of the year historically mild, which kept storage stocks high and meant for less of a need for injections during the summer.
Gas stocks at the UK's largest storage facility Rough were at their highest level for the time of year this decade, data from National Grid showed. Towards the end of July, the facility had close to 3.5 billion cubic meters, or 93% of capacity, which was much higher than the 2.4 Bcm or 64% capacity at the same time last year.
