Wednesday, 28 November 2012 15:28
LONDON: British prompt gas prices eased on Wednesday as withdrawals from the country's biggest storage site rose to leave the market oversupplied and a milder weather outlook led some traders to sell off short-term contracts.
Gas for day-ahead delivery slipped 0.10 pence to 66.75 pence per therm, while within-day gas traded at 66.10 pence.
Gas flows from the Rough subsea storage site rose to around 15 million cubic metres per day (mcm/d) on Wednesday at the start of the gas day at 0600 GMT, National Grid data showed.
The additional supply left the system around 6 mcm/d long at 345 mcm/d, the same data showed.
"It seems like the risk premium is being sold, with weather not looking quite so bullish," said on UK gas trader at a bank.
Britain's Met Office forecast increasing sunshine for Wednesday and a dry day on Thursday, even though some regions will experience very cold weather.
The agency issued a level 2 cold weather alert for Friday in some northern English regions, meaning there was a 60 percent chance of severe cold weather with sharp overnight frost, it said.
But the near curve tracked losses on the prompt, with front-month December shedding 0.55 pence to 66.65 pence and January falling 0.50 pence to 67.65 pence.
The supply outlook for liquefied natural gas (LNG) remained gloomy, with no cargoes currently scheduled to arrive in Britain.
The gas trader said weak LNG supply had been largely priced into the market but that a significant drop in temperatures in Asia could add further risk premium as more LNG cargoes would be diverted to the east to meet high demand.
Seasonal British gas contracts also traded lower on Wednesday as the rest of the market provided a bearish tone and oil prices traded sideways, wary of budget talks in the world's largest oil consuming nation, the United States.
Summer 2013 gas fell 0.30 pence to 62.40 pence and winter 2013 traded at 70.15 pence, down 0.40 pence.
British over-the-counter power prices defied the gas market and rose day on day on the back of reduced wind power output expected for Thursday.
The day-ahead baseload price rose around 2 pounds to 50.60 pounds per megawatt-hour.
Wind power production is expected to drop below 1,500 MW on Thursday, compared with 2,400-3,000 MW seen on Wednesday, National Grid data showed.
Copyright Reuters, 2012