October 31, 2014 / 8:50 AM / 3 years ago

UK GAS-British prices fall on Ukraine-Russia deal

* Nov, Dec UK gas contracts touch record lows

* Ukraine, Russia, EU sign gas deal

* Warmest Halloween on record, Met Office says (Updates throughout)

By Nina Chestney

LONDON, Oct 31 (Reuters) - British wholesale gas prices for the rest of this year fell on Friday after Ukraine and Russia signed a deal that will see Moscow resume gas supplies to Kiev this winter, while warm UK weather and high storage levels added to the bearish tone.

Russia is Europe’s biggest supplier of gas and provides around a third of the continent’s needs, pumping roughly half of that via Ukraine. Some of this reaches Britain from continental European storage sites.

Failure to reach an agreement would have raised fears of disruptions to European gas supply via Ukraine this winter, but prices of wholesale natural gas had already been declining on Thursday afternoon in anticipation of a deal.

The UK gas contract for delivery in November was trading at 52.20 pence per therm at 0915 GMT on Friday, down 1.5 percent from the previous settlement. It earlier touched 52.00 pence, its lowest since the contract began trading.

The December contract was at 54.60 pence per therm, down 1.7 percent, having touched its lowest ever level of 54.40 pence in earlier trade.

However, traders said the falls were not that substantial.

“Everyone was expecting this (deal) to happen so it’s not going to have a massive impact on prices, although the near months have come off a bit,” one gas trader said.

“There are no real bullish indicators out there. The long-term forecast for November and December is warm; storage is very high right across the continent,” he added.

TTF gas prices in the Netherlands, which has become Europe’s leading natural gas hub, declined slightly.

The TTF price for December was down almost 1 percent at 23.15 euros per megawatt-hour, while the first-quarter price was down 1.35 percent at 23.35 euros per megawatt-hour.

PROMPT PRICES

Near-term UK gas prices posted bigger losses but this was due to demand-sapping almost-summer temperatures forecast for some parts of Britain on Friday and Saturday.

The gas price for immediate delivery slumped 5.7 percent to 48.75 pence per therm, while gas for delivery at the weekend fell slightly more than 5 percent to 45.00 pence per therm.

Britain’s Met Office tweeted that Friday could be the warmest Halloween on record with temperatures of 21 degrees Celsius in the southeast.

Due to low demand, the British gas system was oversupplied by 14 million cubic metres (mcm) on Friday, National Grid data showed.

Britain’s gas storage sites are 98 percent full, according to Gas Infrastructure Europe.

“There is so much gas we are going to have problems containing it all this weekend, and with storage injection partially disabled, we should see a lot of exports to Europe,” a gas trader said.

SSE’s Aldbrough gas storage site has its injection capability reduced until the end of November due to an outage.

Additional reporting by Oleg Vukmanovic in Milan; Editing by Dale Hudson

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