LONDON: British wholesale gas prices jumped on Monday as flows from Norway dropped and freezing weather drove up demand for heating, meaning further withdrawals will be needed from storage, traders said.
Within-day gas prices were at 86.75 pence ($1.30) a therm at 1025 GMT, up 11.75 pence or 15.5 percent from Friday's close, while day-ahead prices rose 5.20 pence a therm to 83.90, a gain of 6.6 percent.
"We have seen a big increase in demand as temperatures have plunged towards freezing, and we will need fairly hefty withdrawals from storage and an increase in pipeline flows to balance the system," a trader with a utility said.
Adding pressure to the system, flows from Rough, Britain's biggest storage site, fell to zero for about an hour in the morning from 40 mcm at the start of the day, according to National Grid.
Gas demand was expected to be around 377 million cubic metres (mcm) on Monday, 34 percent above the seasonal norm, according to data from National Grid.
Supply is expected to be 354 mcm, meaning storage sites will have to further deplete already low stocks in order to balance the system, traders and analysts said.
Norwegian exports to Britain fell by 14.1 mcm to 107 mcm, but this was offset slightly by bigger net imports from the IUK pipeline from Belgium.
Britain's gas storage sites were filled to an average of 20 percent, according to the most up-to-date data from Gas Infrastructure Europe, up from around 17 percent last week after utilities injected gas into storage sites on Friday.
But the historically low levels down from around 80 percent in January mean Britain's system will be susceptible to supply outages at a time that demand is unseasonably high because of cold weather, the trader with a utility added.
The UK's Met Office said temperatures would be close to 0 degrees Celsius across most of Britain on Monday, with temperatures only likely to rise to 3 degrees on Tuesday and 6 degrees by the end of the week.
Britain's gas storage sites last week were filled to an average of 17.9 percent, down from over 21 percent at the beginning of the month and from over 86 percent in early January, according to Gas Infrastructure Europe.
British spot gas prices hit five-year highs of 120 pence a therm at the beginning of last week following severe Norwegian supply outages.
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Wintry weather and concerns about supply helped drive up prices further along the curve, with the April contract gaining 0.55 pence to 69.15 pence and the front-season contract at 66.35 pence, its highest level since late September 2011.
Another trader said gas prices would continue to be driven by the weather, and if temperatures remain cold, further gains are likely in forward prices because storage will need to be refilled.
If by the end of the week forecasts show that warmer weather is on the way, however, then spot and forward prices will fall sharply, the trader added.
In Britain's electricity market, day-ahead baseload power was up 11.10 pounds a megawatt-hour to 60.30 pounds, driven mainly by the big rise in gas prices.
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