UK gas prices weaken as flows increase

LONDON: British gas prices weakened on Monday with the market oversupplied due to higher flows from UK gasfields as well as Norwegian and Belgian pipelines, although demand was expected to rise later this week because of colder weather.

Gas for day-ahead delivery traded at 67.25 pence, down 0.25 pence from Friday's closing, while the within-day contract fell 0.75 pence to 66.60 pence.

"There's plenty of supply around but we expect withdrawals from medium-range storage ahead of lower temperatures expected this week," said one trader.

The gas market was around 22.3 million cubic metres per day (mcm/d) oversupplied, National Grid data showed.

Total Norwegian flows to Britain rose to almost 127 mcm/day on Monday from 112 mcm/d Friday.

Supply from liquified natural gas terminals are around 15 mcm/d, up from Friday's average of 11 mcm, with near-term supply expected to be broadly in line with the average so far in February of around 10 mcm/d, analysts with Reuters Point Carbon said.

But relatively low deliveries of LNG mean that Britain's gas system will be less flexible in dealing with lower supply or upticks in demand, Reuters Point Carbon analysts said.

"There is a risk of medium range storage stocks becoming empty if there is a cold spell or supply outage, leading to a tight UK system," Point Carbon said.

Demand was 1.5 percent above the seasonal average, but is expected to rise later this week as cold weather moves into Britain.

The Met Office forecast that temperatures would fall to 4 degrees celsius by Wednesday and to 2 degrees on Thursday, driving up demand for domestic heating.

Britain's benchmark front-season gas price edged up 0.05 pence to to 63.80 pence as Brent crude prices were broadly unchanged at $117.78 per barrel, supported by expectations of improving global growth and Middle East tension.

British power prices gained, with day-ahead baseload power traded up 3.50 pounds days at 51.00 pounds per megawatt-hour.