LONDON: British wholesale gas prices gained almost 1 percent on Wednesday morning as cold weather led to strong demand, which left the system short enough to require injections from storage and LNG terminals, analysts said.
Gas prices for within-day delivery gained by 0.43 pence per therm between Tuesday and Wednesday morning to 68.00 pence at 1030 GMT.
Britain's gas demand was expected to be 387 million cubic metres (mcm) on Wednesday, around 25 percent above the seasonal norm, and supplies at 378 mcm, according to data from National Grid.
Britain's consumption of gas was forecast to be higher as temperatures struggled to get above zero degrees Celsius across much of the country, while flows from UK gas fields would remain low because of maintenance, analysts with Reuters Point Carbon said in a report.
"High withdrawals from storage and LNG (liquefied natural gas) send-outs (injections) will be needed to help balance the system," the report said, pointing to a strong price incentive offered by the prompt contract, which traded higher above the front end of the curve.
January and February gas contracts were at 67.05 pence per therm and 67.50, respectively, up only marginally from the end of trading on Tuesday.
This increased the premium for day-ahead prices to 0.95 pence over the January contract and 0.50 pence above the February vintage, up from a differential of +0.60 pence and +0.14 pence at the close on Wednesday.
Meanwhile, imports through the IUK pipeline could also need to increase to balance supply and demand, Point Carbon analysts added.
Temperatures were forecast to be between -4 and 0 degrees Celsius in southern Britain, with milder conditions not expected until the weekend, the Met Office said.
Further along on the curve, gas prices for delivery in summer 2013 climbed back above 62 pence a therm after falling through this support level on Tuesday.
Front-month Brent crude prices, to which forward gas prices are indexed, were at $108.50 per barrel on Wednesday morning, down from above $111 at the end of November.
API2 2013 coal futures continued to slide, falling to $94.30 a tonne from above $97 at the beginning of the month, making coal increasingly attractive to burn in power stations instead of gas.
UK power prices traded at 52.44 pounds/megawatt-hour, down 43 pence from Tuesday's close.]
Center>Copyright Reuters, 2012
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