LONDON: British prompt gas prices slipped to a two-month low on Monday as warm weather reduced buying from domestic gas suppliers, and filling storage facilities and lower exports added to low gas demand.
Gas for day-ahead delivery fell to the lowest since May 24 on Monday, shedding 1.00 pence day on day to 53.00 pence per therm on the back of a rise in temperatures that capped gas demand at around 30 percent below seasonal norms.
"The support had come through the weather which has thankfully dissipated thus removing the retail supplier from the bid side and leaving demand fundamentals to conentrate on weak gas burn, around 28 percent lower year on year, relatively full storage and muted exports," said Nick Campbell, a UK gas trader at consultancy Inspired Energy.
UK gas storage sites were 80 percent filled on Sunday, roughly in line with levels seen at the same time last year, latest data published by Point Carbon, a Thomson Reuters company, showed.
With weather forecasts showing hot conditions over the coming days, prices also fell further out, with August gas retreating 0.60 pence to 53.20 pence per therm.
September traded at 54.00 pence, down 0.50 pence on the previous session.
Curve contracts also edged lower on early morning weakness in the oil market and bearish impetus from the prompt, which traders say has been dictating movements of long-term contracts more than the oil market recently.
The benchmark front-season UK gas price touched a fresh 17-month low of 62.20 pence, down 0.30 pence day on day.
"The market has decided when Brent rallies there is no correlation between it and gas, however when Brent dumps the correlation comes back into play," another UK gas trader said.
With temperatures expected to remain in line with seasonal averages and a lack of other bullish fundamentals, traders said they expected prices to continue sliding.
"Traders are eroding the risk premium on the winter price, but I'm fairly certain off the back of some bullish news there will be a short squeeze on that contract," said the gas trader, saying that a tightening LNG market could be a trigger for a rise in prices.
British wholesale electricity prices also fell on Monday, echoing losses in the closely correlated gas market, defying low wind power production forecasts.
Day-ahead baseload power fell 1.20 pounds compared with the previous close to 41.80 pounds per megawatt-hour (MWh).
Wind power production is forecast to gradually decline on Tuesday with highs seen at around 500 MW, compared with highs of over 5,000 MW on Monday, according to National Grid data.
EDF Energy, Britain's largest nuclear power producer, also made some production changes in its nuclear fleet over the weekend.
It restarted its Sizewell B units and stopped the Dungeness B21 and Heysham 2-7 units, but leaving overall nuclear production cuts the same week on week.
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