LONDON: British gas prices fell slightly on Thursday as expectations of warmer weather weighed on the market and demand began to drop ahead of the Christmas holiday.
Gas for within-day delivery fell 0.5 pence to 66.00 pence per therm at 0900 GMT.
"It's the last few days before Christmas, so demand is already a bit lower," one gas trader said.
"The weather is set to become relatively mild so demand is weaker on this front as well, so I expect prices to drop further as the system switches from slightly undersupplied this morning to a slight surplus later today."
Temperatures on Friday are expected to be around average for the time of year, with a maximum of 11 °C, according to the UK's MetOffice.
The drop came despite a slightly undersupplied system in the morning.
British domestic gas production increased due to higher flows at the St. Fergus terminal, which are running at 28 million cubic metres per day (mcm/d), up from yesterday's average of 19 mcm/d, Thomson Reuters Point Carbon said.
Britain's demand was seen at 297.3 million cubic metres per day (mcm/d) on Thursday, while supply was expected to reach 279.9 mcm/d, National Grid data showed.
Demand was 0.2 percent below the seasonal norm.
An undersupplied system may require further storage withdrawals. Britain's gas storage sites were filled to an average of 81 percent, down from more than 97 percent at the end of November.
Further out on the curve, front-month gas fell 0.1 pence to 66.80 pence, while February contracts changed hands for 67.25 pence, down 0.30 pence day on day.
On the far end of the price curve, contracts for delivery next summer moved sideways, trading at 62.30 pence a therm, above its 50, 100 and 200 exponential daily moving average (DMA) values at 62.13, 61.55 and 61.27 pence respectively.
Traders said that the forward curve was slightly overvalued.
"The economic outlook remains bad, and the spot markets are also weak because of mild weather, so we're likely to see a downward correction in the gas forward market," one trader said.
Power prices in Britain fell along with gas prices with baseload day-ahead power dropping 30 pence to 48.25 pounds per megawatt-hour (MWh).
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