Gas prices go negative

04 October 2006

Gas prices prove elusive as they go negative the first time for ten years.

Every suppliers nightmare, you have to pay someone to take your product away. At one point within-day gas traded at -5p/therm. The implication of this is that storage is completely full, take or pay contracts are kicking and that some traders would prefer to pay someone to take their gas at 5p/therm rather than have to take the gas (which they physically can't accept delivery of) and then pay a default fixed priced probably in the region of 30-40p/therm.

One must remember that this is a short term withinday issue and that one would not wish to trade large quantities of gas along the curve on the back of it. But it does show that the market is significantly oversupplied and that if demand were to increase the system could cope with it remarkably well.


Gas  Supply  Storage 

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