LONDON: British wholesale gas prices dropped on Tuesday morning after maintenance ended at Norway's Kollsnes gas processing plant over the weekend, but analysts said the gas system remained tight and the market could firm again.
Gas prices for delivery within the day were trading at 63.50 pence per therm at 0800 GMT on Tuesday, down 0.2 pence from Friday's close.
Analysts said that the lower prices were a result of the Kollsnes terminal's return to operations.
"We expect gas demand to pick up tomorrow, and the delayed start-up of the Vesterled and Teesside terminals has left the system slightly short, one gas trader said.
Britain's Met Office said temperatures were likely to drop slightly on Wednesday before picking up towards 25 degrees Celsius by Friday.
Analysts at Thomson Reuters Point Carbon said gas flows from Norway through the Vesterled pipeline, which dropped to zero on Aug. 24, were expected to resume on Tuesday but also warned of possible delays.
Britain's gas demand was expected to be 139.6 million cubic metres (mcm) on Tuesday, around 3 mcm above expected supplies of 136.5 mcm, according to National Grid data.
Further out on the curve, prices for delivery next winter also dropped.
The NBP Winter 2013/2014 gas contract closed below 70 pence per therm last Friday and opened below that level again this morning. The last time the contract was below 70 pence for a sustained period was in 2012.
Technical indicators for the contract were mixed.
The product's Relative Strength Index (RSI) is low at 31.8 points but DOES not yet imply an oversold product (30 or lower), and its moving average convergence-divergence (MACD) signals are bearish, although the trend has flattened.
On the fundamental side, indicators remained relatively bullish, with gas storage levels still well below last year's levels.
Britain's gas storage sites are currently filled to an average of 82.7 percent, 14.4 percentage points below this time last year.
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