LONDON: British day-ahead gas prices eased off eight-month highs on Monday as a Norwegian production outage neared its end, but they remained at overall lofty levels as cold weather is expected to move into the UK later this week.
Gas prices for delivery on Tuesday rose to 71.75 pence a therm on Monday morning, the highest level since April, as an unexpected Norwegian gas field outage threatened to cut supplies to Britain. Prices dropped back to 71.50 pence later in the morning as the outage was expected to end soon.
The plant processing gas from Royal Dutch Shell's giant Ormen Lange field will start to ramp up production around 1400 GMT on Monday after bad weather forced a shutdown earlier in the day, its operator said in a market message.
Norway's Ormen Lange feeds the 70-million-cubic-metre Langeled pipeline, Britain's main gas import route.
"It looks as if Norway's outage this morning didn't impact supplies to Britain, so the market adjusted and was sold down from its morning highs," one gas trader said.
Britain's gas demand was expected to be 294.6 mcm on Monday, slightly above the seasonal norm, according to National Grid data. But with flows seen at 309.5 mcm, the system would still be amply supplied.
Traders said spot gas and power prices remained at overall high levels as cold weather was expected to move into Britain later this week and there were no immediate imports of liquefied natural gas (LNG) to help meet high demand.
Meteorologists said temperatures would gradually fall from a daily average of around 7 degrees Celsius on Monday towards freezing point by the end of the week.
"LNG send-outs have fallen significantly today with nominations of only 11.6 mcm illustrating a possible lack of cargo coming into the UK for the rest of the month due to the higher netback in Asia," another gas trader said.
Asian spot LNG prices neared $19 per million British thermal units on Friday as demand from China and Japan kept supplies tight.
There are currently no LNG imports expected to arrive in Britain, although some overseas gas could enter the UK through its pipeline connections with continental Europe, where two tankers with a combined capacity of 218,000 cubic metres are expected to deliver LNG into Belgium by Dec. 10.
In Britain's spot power market, prices for baseload (24 hours) delivery on Tuesday rose by over five pounds a megawatt-hour to 57.05 pounds ($93.45) a MWh despite windier weather expected to push wind output up from under 1,500 MWh per hour on Monday to over 6,000 MWh an hour by Wednesday morning.
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