(Updates with detail.)
By Angela Henshall and Jake Lovick
Of DOW JONES NEWSWIRES
LONDON -(Dow Jones)- U.K. gas prices rapidly gained ground this week in line with positive sentiment on the futures markets and lower volumes of gas from Norwegian fields and the Dragon LNG Terminal, traders said Thursday.
Traders said rapid gains for the front-month U.S. Henry Hub natural gas futures contract had spurred gains for U.K. prices in the last three sessions. For the first time since the beginning of this year the Henry Hub contract broke through $5 to settle at $5.161 per MMBtu Tuesday, up almost 7%, supported chiefly by stronger spot prices in the U.S.
The bullish feeling in the energy markets has also fed through to significant gains for crude oil futures, with the Nymex contract breaking $80 a barrel on the back of dollar weakening.
As the U.K. heads in to winter, demand for energy to heat homes will pick up; this increase, combined with tighter flows from North Sea fields and Norway, means overall supply in the system will be tighter, lending support to prices.
Inenco gas trader Nick Campbell said increased flows from Total SA's (TOT) North Sea Alwyn field located 140 kilometers east of Aberdeen, had alleviated some of the pressure on the U.K. system, "making up for a shortfall" from the Dragon LNG terminal in Milford Haven, Wales.
Data from the Web site of National Grid Plc (NGG) indicates flows to St Fergus terminal on the Scottish mainland from the Alwyn field dropped to around 5 mcm from Oct. 15 and then climbed back to around 20mcm earlier in the week.
The Dragon LNG plant started commercial operations earlier this year, but flows have dropped in the last few weeks, which market participants think could indicate they are reviewing operations in order to prepare the terminal to receive greater volumes next year.
"Cold weather in Germany has seen their (domestic) spot price increase, leading to some Norwegian flows being diverted to the German market," said Campbell. Flows through the Langeled have dropped to around 21 mcm at the start of the week from around 50 mcm last week.
-By Angela Henshall and Jake Lovick, Dow Jones Newswires; +44 (0)20 7842 9285; angela.henshall@dowjones.com