LONDON: British natural gas and power prices largely fell on Thursday as rising temperatures reduced demand and the weak oil market weighed on contracts, although a tight system during the morning did push up prices for delivery within the day.
Britain's gas demand was expected to be 212 million cubic metres (mcm) on Thursday, around 5 percent above the seasonal norm, according to National Grid. With flows seen only at 194.4 mcm, the system would be 17.6 mcm undersupplied.
As a result, gas prices for delivery within the day gained 0.5 pence per therm from their last close to 51 pence at 0915 GMT.
The undersupplied system was a result of lower gas flows from Norway as well as a storage outage at Britain's Hornsea facility as well as an ongoing outage at the Britannia gas processing facility.
Despite the tight system, gas prices for delivery on Friday dropped, 0.4 pence to 50 pence per therm.
"Expected weaker demand for tomorrow has seen the day-ahead trade down from yesterday's equivalent," said Marcel Boonaert, head of trading and portfolio at gas supply company Wingas UK.
Meteorologists said that average British temperatures would rise from 12.5 degrees Celsius on Thursday to 16 degrees by the weekend, almost 6 degrees above the seasonal norm, and the warmer weather is expected to reduce heating demand from 110 mcm on Thursday to 80 mcm by Saturday.
Gas prices further out on the curve were aso down, with prices for delivery during the first quarter of 2015 shedding 0.1 pence in value to 58.20 pence per therm.
"Oil prices continue to pressure seasonal contracts, glut of supply and worries over global economies driving the front month Brent crude prices to below $83/bbl earlier today," Boonaert said.
Wholesale British power prices were also down despite large-scale nuclear outages of eight units with a combined capacity of almost 5,000 megawatt.
Prices for baseload (24 hours) delivery on Friday were down 1.95 pounds (3.1204 US dollar) per megawatt-hours (MWh) to 48.30 pounds a MWh.
The lower prices were a result of falling demand towards the warm weekend being met by rising wind power output, which is expected to rise from 3,000 MW on Thursday towards 6,000 MW over the weekend.
"The fall is largely due to a storm heading towards the UK and Europe this weekend, bringing with it warm but windy weather conditions," said Dorian Lucas, an analyst at energy consultancy Inenco.
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