LONDON: British wholesale gas prices were steady on Thursday as a balanced system helped the market consolidate after posting hefty gains in the previous session.
The day-ahead contract rose as much as 0.6 percent to a five-day high of 39.65 pence/therm after jumping nearly 5 percent on Wednesday on the back of an undersupplied system.
British gas supply and demand were both expected to be around 183 million cubic metres (mcm) on Thursday, according to the National Grid.
"The market has opened balanced, a sign that storage injections have adjusted correctly to IUK maintenance instead of nominating to such an extent that the market be substantially short," analysts at Thomson Reuters Point Carbon said.
The InterconnectorUK (IUK) pipeline, which sends gas to continental Europe, was taken offline on Wednesday for maintenance that is expected to last until June 26, meaning more supply availability.
"Changes in supply do represent a small upside risk (for day-ahead prices), notably Langeled but also BBL. Some of this risk is offset by a drop in consumption, which points again to the market trading sideways," the Point Carbon analysts added.
The analysts expect lower imports from the BBL and Langeled pipelines, which transport gas to Britain from Europe, due to already healthy supply levels.
"While the closure of the IUK pipeline is weighing heavily on the prompt, the fundamentals are still soft, and further erosion in prices along the curve cannot be ruled out," said analysts at London-based Energy Aspects.
Front-month gas prices gained 0.7 percent to 40.90 pence/therm by 0820 GMT on Thursday, while the winter 2014 contract added 0.8 percent to 59.45 pence.
Energy Aspects analysts said they expected supply reductions from major gas producers Norway, the Netherlands and Russia over coming months to help offset the existing oversupply, but cooler temperatures in northeast Asia this summer could result in higher LNG availability.
"We are bearish for prices over the coming summer and into October, but are more bullish for the rest of the curve," the Energy Aspects analysts said.
"A colder winter than the last one will return us to much heavier use of gas in storage ... With demand rising and domestic supply falling, even an increase in LNG volumes is unlikely to do much to dent Europe's need for more Russian gas in 2015," they added.
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