UK gas prices rise on colder weather forecast

UK prompt gas prices rose on Thursday morning as colder weather was expected to raise heating demand across the country ahead of the Easter weekend.

The UK’s MetOffice said that it expected “dry and cold overnight” conditions “with widespread frost developing (and) minimum temperatures (of) -5 degrees Celsius”.

For Friday the MetOffice said it expected a cold and frosty start and maximum temperatures of 13 degrees.

Gas demand in the UK was expected to be around 286.6 million cubic metres (mcm) on Thursday, according to National Grid.

While this was still almost 4 percent below the seasonal norm, it was up from almost 20 percent below average at the beginning of April.

But with gas flows only expected to come in just above 281 mcm, the system was expected to be around 2 percent undersupplied, implying the need for storage withdrawals or gas imports.

UK gas storage sites were filled to an average of just under 60 percent on Wednesday, down from above 60 percent earlier this week, according to Gas Infrastructure Europe.

But UK gas storage levels remain higher than the European average of 42.75 percent, and traders said that the system was stable.

“It is true that gas demand is up and supplies are a bit constrained, but the UK system remains stable,” one gas trader said.

As a result, spot gas prices rose only slightly, with day-ahead contracts trading around 59.90 pence ($0.95) per therm at 0900 GMT (1000 BST), up 0.65 pence since Wednesday afternoon.

Within-day gas was trading at 60 pence, up 0.3 pence a therm.

Point Carbon gas analysts said they were slightly bearish in their price expectations for day-ahead contracts, forecasting NBP spot gas prices of 58.60 to 60.50 pence per therm.

British power prices for next-day baseload (24 hours) delivery slipped further from 46.70 pounds per megawatt-hour (MWh) on Wednesday to 46 pounds a MWh on Thursday morning as electricity demand was expected to fall significantly on Easter’s Good Friday, which is a public holiday in the UK and large parts of Europe.

TECHNICALS

Further out on the price curve, benchmark UK NBP winter 2012 gas prices found some technical support following sharp price falls earlier this week.

The product dropped to its 50 exponential daily moving average (DMA) marker just above 72.50 pence per therm on Wednesday, but technical buying then lifted the contract back to 72.90 pence on Thursday morning.

Reuters