UK gas prices firm on short supply

Thu Sep 13, 2012 4:55am EDT

* Day-ahead gas at 60.50 p/th

* System seen 16.4 mcm short

* Winter prices find support at 66 p/th

LONDON, Sept 13 (Reuters) - British prompt gas prices edged higher on Thursday morning on the back of a shortage in the system, although analysts said improved supplies later in the day could turn the market bearish.

Gas for Friday delivery was 0.50 pence higher at 60.50 pence per them at 0830 GMT on Thursday as demand outstripped supply by 16.4 million cubic meters (mcm), National Grid data showed.

Prices, however, were expected to move lower later in the day as supply ramps up, analysts at Thomson Reuters Point Carbon said.

"Imports from Norway and the Netherlands are higher this morning and could remain at the current level for day-ahead. Additionally, UKCS production could increase further due to the end of maintenance at several terminals," the analysts said.

They suggested a bearish trading range of 60.2 to 59.6 pence per therm for the day.

Britain's gas market supply was expected to be 140.7 mcm leaving the market short even though demand was running around 37 percent below average at 157.1 mcm.

Flows through the Langeled pipeline that connects Norway with Britain hit 30 mcm this morning, up from around 24 mcm on Wednesday while supplies of liquefied natural gas (LNG) at Avonmouth ticked up to around 38 mcm from 30 mcm the day before, National Grid data showed.

"Higher Langeled flows seem to be related to a similar drop in French import of Norwegian gas through Franpipe," the analysts said.

Total gas imports for Norway to Britain rose by 5.9 mcm to 44.6 mcm.

Gas prices for winter 2012 delivery edged 0.10 pence higher to 65.85 pence, stable and in line with front-month Brent Crude prices which were little changed at $115.70 per barrel.

The contract edged up after briefly falling below 66 pence per therm in the morning.

Trading around 66.30 pence per therm at 0845 GMT, the contract was also slightly above its 100 exponential daily moving average (DMA) rate of 66.13 pence a therm.

In Britain's power market day-ahead prices fell almost 2 pounds on Wednesday's session to 41.88 pounds per megawatt hour.

UK wind power production levels are expected to hit a peak at almost 5 gigawatts on Friday evening, helping to offset reduced supply from the country's nuclear plants.

Some 2,280 megawatts (MW) of nuclear capacity was offline at four plants on Thursday, with EDF's 550 MW Dungeness B22 united expected to resume output on Friday after an unplanned outage. (By Susanna Twidale and Henning Gloystein, editing by William Hardy)

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