By Ben Farey June 16 (Bloomberg) -- U.K. natural-gas is headed for its biggest second-quarter rally as European buyers drain fuel at a record pace and North Sea production wanes. Gas for next-month delivery has gained 54 percent since the end of March on the ICE Futures Europe exchange in London, where the contracts began trading in 1997. The commodity’s next best second quarter was in 2000, when prices rose 45 percent. Exports to Europe through a pipeline linking Britain to Belgium jumped to the highest level in more than six years, as industries store up for winter, according to the operator Interconnector (U.K.) Ltd. The increase follows a record 14 percent drop in North Sea output last year caused by dwindling reserves, Department of Energy and Climate Change data show. “Continental buyers are able to take more gas than they were previously and that’s firming up prices,” Graham Freedman, a senior analyst at Wood Mackenzie Consultants Ltd. in London, said in a phone interview. Edinburgh-based Wood Mackenzie plans to raise its U.K. gas-price forecast by about 10 percent later this week, he said. The July gas contract on ICE climbed 6.9 percent yesterday to 45.63 pence a therm. It retreated 2.5 percent at 10:24 a.m. local time to 44.5 pence. That’s equal to $6.58 a million British thermal units. A therm is 100,000 Btus. Undersea Pipeline Interconnector’s 145-mile (230-kilometer) pipeline carried more than 54 million cubic meters on May 21 this year, about 4 million cubic meters short of the daily record set on April 29, 2003, Darren Reeve, commercial manager at the London-based company, said in an e-mail. “That gas is going out into European storage,” John Fahy, managing director of energy consultant Eras Ltd., said in a phone interview from London. European stockpiles are about 56 percent full, according to weekly data from Gas Storage Europe in Brussels. U.K inventories fell to the lowest level in at least seven years in March after the coldest winter in more than three decades, according to the U.K. Met Office. E.ON AG, the Dusseldorf, Germany-based is buying more from the U.K. and avoiding pricier Russian and Norwegian gas indexed against oil prices. Brent crude oil futures surged 71 percent last year to $77.93 a barrel. The jump in shipments has turned Britain into a transit point for Norwegian and Qatari gas, according to Patrick Heren, the London-based founder of ICIS Heren, a European gas-price information service. Winter Trend “It’s a commercial bypass as well as a physical transit,” allowing buyers to avoid higher oil-linked contract prices that exporting nations are striving to maintain, Heren said. During the winter, the reversible Interconnector link typically starts to send more gas into the U.K. than it ships out, a time when the nation’s demand and prices are highest. It’s been exporting gas since March 11. Production interruptions in Norway and a looming strike by North Sea oil- and gas-platform workers have boosted U.K. prices by almost 12 percent this week. The summer months are traditionally used by rig operators to carry out essential maintenance, when production halts at some fields. BG Group Plc is operating a rolling program of maintenance throughout June at its North Sea fields and deliveries into Britain via BP Plc’s CATS pipeline are being reduced. With North Sea fields ageing, the government predicts the U.K. gas market will be entirely dependent on imports by 2030. To contact the reporter on this story: Ben Farey in London at bfarey@bloomberg.net

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