LONDON: British gas prices eased on Tuesday as the system was well supplied thanks to higher imports from Norway and as temperatures above seasonal norms sapped demand.
Gas for Tuesday delivery fell 0.85 pence to 65.00 pence, while day-ahead gas slipped day on day to 65.75 pence.
Imports from Norway via the Langeled subsea pipeline rose around 10 percent compared with average flows seen on Monday, leaving the British gas market oversupplied by 12 million cubic metres per day (mcm/day), National Grid data showed.
Tuesday's temperatures were pegged around 2 degrees Celcius above seasonal norms, meaning less gas was needed to supply heating systems.
But forecasts for cooler weather conditions ahead kept front-week and February gas prices at a premium to spot contracts.
"Nearside contracts are down a touch after Monday's strong gains but they're still supported by the cool outlook," said one energy trader at a utility.
Gas for delivery during weekdays next week shed 0.35 pence to 67.90 pence, but maintained a wide premium of more than 2 pence over the spot market.
Temperatures are forecast to drop to normal or just below normal levels, according to Britain's Met Office.
Further out, contracts fell in line with losses on the prompt, but Brent crude prices steadying above $111 per barrel provided some upside pressure.
The benchmark front-season contract traded 0.20 pence lower than the previous session's closing price, changing hands at 62.20 pence.
Deutsche Bank predicted in a report published on Tuesday that UK gas prices will fall below current levels, with the average cost for 2013 gas expected to drop to 62.60 pence, 2.3 pence below current levels.
"Low coal prices relative to gas, government-sponsored subsidies for energy efficiency improvements and weak economic performance have all done their part in contributing to lower demand," analysts said.
In Britain's over-the-counter power market, prices defied the bearish gas prompt and posted day-on-day gains due to a significant drop in wind power production forecasts.
Day-ahead baseload power rose 80 pence to 48.60 pounds per megawatt-hour (MWh) as Britain's wind farms were expected to produce on Wednesday less than half the electricity due to be generated at peaktime on Tuesday, grid data showed.
At the same time, imports from France continued to be restricted by 500 MW due to maintenance, further tightening power supply margins.
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