LONDON: British wholesale natural gas prices fell on Wednesday morning in response to slight oversupply and after negotiations between Ukrainian and Russian leaders led to the promise of work on a ceasefire plan in Ukraine and talks on gas supplies.
Gas prices for next-day delivery were down 2.9 percent to 41.85 pence per therm at 0831 GMT, compared to the previous settlement, while gas for immediate delivery was down 4.1 percent at 41.90 pence per therm.
Britain's gas demand was expected to be around 163 million cubic metres (mcm) on Wednesday, 8 mcm below the seasonal norm, according to National Grid data.
With supplies of around 167 mcm forecast to come in, the system was around 4 mcm oversupplied.
UK Continental Shelf (UKCS) gas flows were slightly higher on Wednesday than the previous day.
Exports to the continental Europe have also decreased and withdrawals of gas from storage were needed overnight to balance the system.
"We expect UKCS flows to increase towards 110 mcm/d before dropping 10 mcm/d between 2-23 September due to maintenance at the South Area Facilities," said Anette Einarsen, analyst at Thomson Reuters Point Carbon.
There are currently no flows from the Netherlands via the BBL pipeline due to maintenance which will last until Aug. 30.
On Sept 2., flows from Norway through the Langeled pipeline are expected to fall to zero due to maintenance at Norwegian gas systems operator Gassco's Easington terminal in Britain.
Traders said weather models were showing a higher pressure system across much of north-west Europe which would bring slightly warmer temperatures and thereby dampen gas demand.
RUSSIA-UKRAINE
Prices fell further along the gas curve as the presidents of Russia and Ukraine on Tuesday night agreed to talks on Russian gas supplies to Ukraine.
The first negotiations between Ukrainian President Petro Poroshenko and Russia's Vladimir Putin since June were described by Putin as positive.
Putin said the two presidents agreed to talks on Russian gas supplies to Ukraine.
Traders said they would be looking for developments on this on Friday when talks between Russia, Ukraine and the European Union take place in Moscow.
"European gas price movements continue to be influenced by the unfolding events in Ukraine," said analysts at UK-based energy consultancy Energy Aspects.
The September gas contract was down 2 percent at 41.85 pence per therm, while gas for delivery in the upcoming winter 2014-2015 season was down 2.2 percent at 57.80 pence per therm.
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