LONDON: British prompt gas prices rose on Monday morning as cold weather lifted demand and left the system undersupplied, while low storage inventories made the system more vulnerable to price swings.
Tuesday gas was up 2.70 pence to 72.90 pence per therm at 1030 GMT largely because the system was undersupplied by 6 million cubic metres/day (mcm) while cold weather forecast for this week kept demand expectations high.
"People are rightly worried about the weather...if the cold continues past next week in a significant way then medium-range storage is not going to be there to fill the gap," a UK gas trader said.
Low inventories at mid-range storage sites, high demand and supply issues in Norway briefly pushed within-day gas prices to one-year highs on Friday.
Gas for immediate delivery rose 1 pence to 75 pence on Monday.
Withdrawals from storage fell to 75 mcm from 109 mcm on Friday as stockpiles at Rough, Britain's biggest such facility, and other mid-range sites fell below their levels at this time last year.
Dwindling stocks are forcing operators to replenish some sites, while others are pumping out gas to fetch high prices.
"Nominations suggest net storage withdrawals of 43 mcm today with Rough and Holford withdrawing, while Aldbrough is nominating 13 mcm of injections," analysts at Thomson Reuters Point Carbon said.
UK gas demand was 15 percent above average levels at 356.6 mcm as cold weather spurred demand in heating systems.
Britain's Met Office predicted the cold weather to ease somewhat this week, with occasional spots of rain in the south.
In its forecast for between Mar. 1-10, it said: "Temperatures generally near or a little below average at first, turning cold, locally very cold in the northeast for a time, then generally a little less cold later."
Prices for the rest of the week, adjusting to bullish sentiment, traded 3.80 pence higher at 71.90 pence.
Further out, curve contracts were also buoyed by gains on the prompt and on crude oil markets, with the benchmark front-season contract up 0.45 pence at 64.80 pence.
Brent crude prices rose more than $1 a barrel to $115.18, supported by a stronger euro as investors eyed the outcome of Italy's elections to gauge the region's economy.
Baseload power for 24-hour delivery on Tuesday rose 4.75 pounds to 58.25 pounds per megawatt-hour, tracking bullish sentiment in the gas market.
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