LONDON: Wholesale natural gas prices in Britain fell on Tuesday as weak demand for gas due to warm weather led to oversupply.
Gas prices for day-ahead delivery were trading at 37.15 pence per therm at 0832 GMT, down 0.20 pence from Monday's close.
Prices for within-day delivery were 0.75 pence lower at 37.10 pence per therm.
Demand for gas was forecast to be at 165 million cubic metres on Tuesday, 14 mcm below seasonal normal demand. Flows were at around 173 mcm/day, meaning the system was oversupplied by around 8 mcm, National Grid data showed.
Demand for gas is usually weak at this time of year due to warmer weather.
Temperatures are forecast to be higher than normal this week, hitting highs of 27 degrees Celsius in London on Wednesday and Thursday, according to the Met Office.
Injections of gas into storage should increase ahead of scheduled maintenance in August in the UK's Continental Shelf (UKCS), analysts said.
From Aug. 1 to 14, there is planned maintenance on the Forties Pipeline system and the CATS Riser Platform in the North Sea. More than 60 oil and gas fields feed into these networks and the outage will likely have a significant impact on UKCS production.
This could cause prices for delivery in late summer and autumn to rise in the coming weeks.
On Tuesday, prices for August delivery were down 0.30 pence at 37.20 pence per therm, while the September contract was 0.35 pence lower at 38.65 pence per therm.
SANCTIONS
Prices could be pushed even higher by the Ukraine crisis, which many analysts fear will result in a disruption in the supply of Russian gas destined for western Europe and flowing through Ukraine.
At the end of last week, British gas prices gained ground on the news of the crash of a Malaysian Airlines plane over eastern Ukraine.
Prices have since retraced those gains but the market is eyeing whether Western sanctions on Russian firms and individuals could be widened to include Gazprom.
Analysts at consultancy Energy Aspects said in a research note that was unlikely as "it seems unthinkable that the company would be used as an instrument to fund the rebels."
"As such, the main Russian gas supply risk remains the underlying contractual dispute between Gazprom and Naftogaz -with any supply disruption coming from this likely to be focused on the winter months," they added.
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