LONDON: British gas for delivery next winter touched a fresh 16-month low early on Tuesday but steady trade in the oil market and a firmer short-term gas market capped losses later in the morning.
The winter 2012 gas contract slipped to 63.20 pence per therm, the lowest since mid-February 2011, in early trading on Tuesday but rebounded to 63.55 pence when Brent crude steadied at $91 per barrel following forecasts of a drop in US crude stocks and after day-ahead gas prices rose.
"We are seeing winter '12 now struggling to go down below (recent) levels as the prompt is not coming off. We probably need to continue to see high Norwegian flows combined with more LNG (liquefied natural gas) into the UK and north-west Europe before the prompt can come off," a UK energy trader at a utility said.
Prompt contracts posted slight gains as the system was undersupplied at the start of the trading day due to a drop in mid-range storage withdrawals.
But a steady overnight rise in gas flows through Apache's St Fergus Mobil terminal after maintenance ended helped balance the system later in the session.
The market also prepared for a rebound in demand as Britain's gas export pipeline to Belgium was expected to reopen on Thursday following maintenance, the trader said.
Other traders said Norway's oil worker strike was still not affecting gas exports to the UK and continental Europe as a four percent drop in gas output was made up by other fields unaffected by the strike.
Day-ahead gas traded up 0.25 pence to 54.95 pence per therm, at par with within-day price levels.
In Britain's power market spot prices firmed following the unplanned outage of a large nuclear reactor on Monday evening, which tightened supply margins.
Electricity for baseload day-ahead delivery rose 75 pence to 42.65 pounds per megawatt-hour.
EDF Energy's 610-MW Heysham 1-2 nuclear unit stopped unexpectedly on Monday evening.
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