LONDON: UK gas prices rallied on Wednesday as the major gas leak in the North Sea caused a reduction in supplies to Britain.
British gas prices rose across the board on the back of a string of supply disruptions including the gas leak at Total's Elgin gas platform that forced rival Shell to evacuate and shut a nearby gas rig.
Gas prices for next-day delivery rose by 3.3 pence per therm between Tuesday afternoon and Wednesday morning to 59.90 pence, and within-day gas delivery prices were also up around 3 pence to 60 pence per therm.
Power prices for baseload (24 hours) delivery on Thursday were trading around 45.35 pounds per megawatt-hour, up around half a pound since Tuesday afternoon.
"The North Sea gas outages are pushing up prices during a time that we would usually see a bearish market as a result of the warm weather," one gas trader said.
Daily UK gas demand was expected to be around 232.7 million cubic metres, according to National Grid data, over 20 percent below the seasonal norm.
Despite the low demand, the North Sea problems meant that gas supplies could fall short of demand, implying the need of storage withdrawals.
UK gas storage sites were around 56 percent full on average on Tuesday, according to Gas Infrastructure Europe.
This compared to a European average of under 43 percent.
Further out on the curve, prices for delivery next summer were up 1.5 pence a therm to 61.50, their highest value since mid-February.
Contracts for delivery in the fourth quarter of this year were up 1.35 pence to 71.85 pence a therm.
"We continue to recommend a long position in UK NBP 4Q2012 contracts as we expect UK NBP prices to be well above the current forward curve in 2H2012," US investment bank Goldman Sachs said in a research note.
"Our view is mainly driven by the expectation of a normalization of weather trends relative to a very mild 4Q2011. This is likely to help narrow the price differential between spot and oil-indexed natural gas beyond what is currently priced into the forward curves."
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