UK May gas up on cold weather, curve tracks firm oil

British prompt gas prices traded higher on Friday, supported by the month-ahead contract which rose on the back of colder weather forecasts, while rebounding oil prices lifted the benchmark front-season price off a two-month low.

May gas prices rose 0.25 pence to 58.35 pence per therm on Friday as Britain’s Met Office forecast temperatures to fall slightly below seasonal norms over the coming 6-15 days, lifting the potential for higher gas demand.

“Spot pricing is firm on May 2012 strength, with continued forecasts of a cold May ahead,” one UK gas trader at a utility said.

Day-ahead gas reflected gains on the May contract and added 0.10 pence to 59.85 pence, while within-day gas traded at 60.40 pence, up 0.15 pence.

The gas system opened undersupplied on Friday as withdrawals from storage facilities stopped because prompt prices were not high enough to make a profit on flowing gas stored at lower summer prices, traders said.

Withdrawals from Britain’s largest storage facility, Rough, fell from 30 million cubic metres per day (mcm/d) overnight to just 10 mcm/d on Friday morning, while flows from the Aldbrough site dropped to zero at the start of the gas day at 0500 GMT, National Grid data showed.

Gas demand remained subdued at 253.5 mcm/d, 10 percent below seasonal norms.

The outlook for liquefied natural gas (LNG) supply, which Britain is increasingly dependent on, was also healthy with five more vessels expected to deliver the fuel unitl May 4.

In France, LNG terminal strike action forced the diversion of Qatari delivery, which is expected to arrive in Spain on Saturday instead, AIS data showed.

Talks between French trade union CGT and terminal operator GDF Suez continued on Friday to discuss workers’ demands for higher bonuses.

Further out, benchmark front-season prices rebounded from a fresh two-month low reached on Thursday as firmer oil prices led bullish trading activity.

Winter 2012 gas prices traded up 0.15 pence at 69.90 pence per therm.

British day-ahead power prices defied movements in the gas market and fell day on day as mild weather forecasts for early next week were expected to weigh on demand.

Spot baseload power fell 15 pence to 45.35 pounds per megawatt-hour (MWh).

Reuters