UK GAS-Gas prices ease on lower demand, higher Norway flows

British wholesale gas prices eased off their up to two-year highs on Wednesday, triggered by surging prices for liquefied natural gas (LNG) and emissions, with bearish fundamentals finding a stronger foothold.

The day-ahead contract was down 0.15 pence at 45.35 p/therm by 0940 GMT, and further off its highest point since Feb. 2019 of 47.50 p/therm hit on Tuesday.

"Recent wind speeds have been high in the UK and has reduced the call on gas while the uptick in temperatures and subsequent fall in consumption was also a factor," analysts at Refinitiv said in a note.

The UK gas system was over-supplied by 10.5 million cubic metres (mcm) on Wednesday, with demand forecast at 255.4 mcm, more than 53 mcm below the seasonal norm, National Grid data showed.

Flows of Norwegian gas to Britain were up 11 mcm day on day at 120 mcm/day after maintenance ended at the flexible Oseberg gas field.

Although temperatures in Britain should drop to 7.2 degrees celsius on Thursday from 8.2C today, this was still above the seasonal average, Refinitiv said.

Peak wind generation is forecast at 14.4 gigawatts (GW) on Wednesday, and 13.6 GW on Thursday, out of total metered capacity of around 18 GW, Elexon data shows.

Refinitiv data pegged local distribution zone (LDZ) demand, which mostly reflects heating, at 195 mcm/day for Thursday, down 4 mcm from previous forecasts, while demand for power was 6 mcm higher at 47 mcm/day.

"Falling demand as we enter the festive season and the impact of the latest government restrictions on London can also have a bearish impact on the curve," Refinitiv's analysts said.

The contract for NBP January gas deliveries shed 0.75 pence to 48.80 p/therm.

The Dutch TTF January contract was also down 0.21 euros at 16.94 euros per megawatt hour.

The new benchmark Dec-21 EU carbon contract was down 0.12 euros at 32.06 euros per tonne.