LONDON: British prompt gas prices moved sideways on Thursday morning as an undersupplied system, due to low Norwegian imports and scheduled liquefied natural gas (LNG) arrivals, was offset by weak demand.
Gas prices for within-day delivery rose by 0.1 pence per therm between Wednesday and Thursday morning to 61.20 pence per therm, while prices for delivery the next day were down by 0.1 pence to 60.90 pence a therm.
Despite cooler weather, gas demand in Britain remained around 30 percent the seasonal norm at 176.9 million cubic metres (mcm), according to National Grid.
But with flows only expected at 152.5 mcm, the system was seen to be 24.4 mcm short, making imports or storage withdrawals necessary.
Britain's gas storage sites are currently filled to an average of 94.37 percent, according to data from Gas Infrastructure Europe, down from almost 98 percent at the beginning of the month.
Traders said that the low demand was a result of Britain's weak economy and because gas-fired power generation is less profitable than coal.
"Those utilities that can switch between coal and gas switched to coal in early 2012 and have been firing coal from all holes ever since then," one utility trader said.
Coal-fired electricity generation for baseload (24 hours) delivery in the first quarter of 2013 is now almost 20 pounds per megawatt-hour (MWh) more profitable than power produced from gas.
Healthy export levels from traditional exporters such as Colombia or South Africa as well as rising supplies from the United States, where a shale gas exploration boom has pushed coal out of the domestic market and into Europe, have led to an oversupplied coal market and helped pull prices down.
API2 2013 coal futures contracts have been in a downward cycle since summer 2011 and have dropped more than a quarter since then to under $100 per tonne.
At the same time, European gas markets are tight as buyers have to compete with Asian utilities for imports of liquefied natural gas (LNG) and pipeline supplies from Russia and Norway are also tight.
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